Plan for Student Loans to go private

Universities are seeking more private financing because of fears that public funding will be spread out thinly over time. A key revenue source being eyed by the sector includes HECS income-contingent student loans to international students where demand is heavy.

Glenn Withers, chief of peak body Universities Australia said that because of the global bad-debt crisis financiers were looking for safe investments, and one of the more attractive options includes government-backed universities with growing flows of domestic and international students.

'We think the finance industry is going back to basics, and this is basics for the 21st century,' he said.

Using private fundsto offer income-contingent loans to international studentsis a way of making Australia more competitive in the international student market where the money is flowing. Education is now Australia's largest service export earner, bringing in $15.5 billion a year.

Under proposal are income-contingent loans to international students from the private sector that could be backed by Canberra through tax agreements with source countries. These countries would collect the tax through their own system and remit it back to Australia while being covered for the cost.