A plan to recover the student debts of people who have died was under consideration by the Federal Government, documents obtained by the ABC under Freedom of Information reveal.

The Federal Education Department estimated the move could save taxpayers $46 million over a decade, but it acknowledged it would be controversial.

The Government eventually rejected the proposal.

So, what happens to the unpaid debt?

The Government is owed $55 billion by people who accessed the Higher Education Loan Program (HELP), and at least $20 billion of that debt is forecast to be written off.

Under the current law, if a person does not pay off all money they owe under HELP before they die, that debt is wiped.

The documents show the Government has written off the student debts of 9,000 people who have died over the past 25 years, at a cost to taxpayers of $80 million.

A further 18,000 people with student debts are expected to die over the next 10 years.

What are students signing up for exactly?

The repayment of HELP debt is the last thing on the mind of many students when they sign up for the Commonwealth assistance, and it's not helped by the fact the official form students must complete when requesting a loan gives few details.

On a Request for Commonwealth Support and HECS-HELP form, for instance, students tick a box that merely states: "I understand that I will repay to the ATO the amount that the Commonwealth has loaned to me. These repayments will be made in accordance with Chapter 4 of the Act, when my income reaches a certain level, even if I have not completed my studies. I understand my HELP debt will be indexed annually in line with the Act."

No doubt few students would take the time to consult the Act referred to — the Higher Education Support Act 2003.

The Act spells out the percentage of student debt that must be repaid once an individual reaches the income threshold for repayment.

And once that threshold is reached, the amount that comes out of a graduate's pay packet can come as a shock.

Backbenchers push for change

Under a proposal drawn up by federal bureaucrats in 2017, HELP debts "would be treated in the same manner as other government debts such as tax debts" and recovered from deceased estates.

But the Education Department estimated only 10 per cent of that money would be recovered in the short term.

The policy proposal said:

"There are risks associated with the negative reaction from the Australian community to the collection of debt upon death that would otherwise not be payable. "It changes the income-contingent nature of the loan scheme. "Existing debtors took out their loans on the understanding that any unpaid debt would be written off upon death."

The administrative burden on the Australian Taxation Office would also be significant.

It was estimated the proposal would cost $12.4 million initially over the first five years to set up, with ongoing costs of $2 million per year after that.

Concern over the high amount of student debt that remained unpaid recently prompted the Federal Government to progressively lower the income threshold for HELP debt repayment.

In 2017-18 the threshold was $55,814, but that dropped to $51,957 in 2018-19, and from July this year the threshold will drop to $45,881.

But two then backbenchers, Liberal Ben Morton (now an assistant minister) and Labor MP Julian Hill, wanted the Government to go further, spearheading a push last year to recover HELP debts from deceased estates.

Despite the Government scrapping the proposal, the Grattan Institute's Ittima Cherastidtham said there was merit in the idea.

"We think HELP debt should be treated just like any other debt that you owe the Government," she said.

"Part of the reason it's controversial is that people think of this policy as being a version of inheritance tax. And inheritance tax is such a visceral topic for a lot of people.

"What we're saying though is it's not an inheritance tax. This is just a debt, and people repay their debt."

A spokesperson for the Federal Education Department said there were no plans to recover HELP debts from deceased estates.

"No attempt is made to recover a HECS-HELP debt from a deceased estate," the spokesperson said. "The Department has not been asked to make any change to this arrangement."