If Australia charged international students even more, it could reduce their numbers without eating into universities' bottom line.
In a bid to curb immigration, the federal government has vowed to impose a cap on the number of overseas students arriving in Australia to 270,000 from 2025, after more than 445,000 commenced study in 2024.
Many university executives have baulked at the idea, noting it would decimate funds used for academic research.
But Bruce Chapman, the architect of Australia's student loan program and emeritus economics professor at the Australian National University, says the government could instead place a levy on international student fees.
Foreign students already pay significantly more for their courses than domestic students.
Using a levy would further increase prices, providing more revenue for universities and decreasing international enrolment numbers without imposing a blunt instrument such as a cap, according to Professor Chapman.
The suggestion was one of many made during his speech to the National Press Club on Monday.
While he insisted the Higher Education Contribution Scheme (HECS) was not broken, it needed urgent attention.
"HECS has become increasingly inequitable and less fit for purpose," he said.
For example, many banks handle HECS debt the same way as other debts, which can put some graduates at disadvantage when they are paying off or acquiring mortgages.
Instead, financial institutions should focus on a person's capacity to repay a loan based on their disposable income, not their student debt.
Additionally, many TAFE and vocational education and training students do not have access to the government's student loan help, which means they face can face thousands in up-front fees.
"A HECS loan is needed to finance and offer insurance for all tertiary students," Prof Chapman said.
The former government's job-ready graduate package, which hiked prices for many arts degrees and cut the cost of science, engineering and mathematics courses, has been lashed by Prof Chapman as it has led to "unfair relative prices, large debts for the lowest income graduates and thus a profound sense of social injustice".
But addressing the changes provides opportunity to change the price settings for HECS, which he conceded "have always been wrong".
Graduates' repayments should instead be based on their expected lifetime incomes.
An Australian who has completed a law degree, for example, will earn about 44 per cent more than the average graduate, and according to Prof Chapman, they should should be charged more.
Teachers, who he says earn about five per cent less than the average graduate, should also pay less.
"The big steps towards major reform to the job-ready graduate package have now been taken," Prof Chapman said.
"HECS' biggest problem can be sorted out soon."
