Australian university students are sinking deeper into debt and within three years are expected to owe the federal government more than A$10 billion (Pounds 3.8 billion).

The debt is building up through Australia's Higher Education Contribution Scheme and a system of loans.

Before Hecs was introduced by a former Labor government in 1989, tuition was free except

for a A$250 "administration charge". But with rising enrolments, the then government needed additional sources of revenue and opted for a deferred payment system.

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Students were required to pay about 25 per cent of the average cost of a course. They had the option of paying the reduced tuition on enrolment and receiving a discount, or defering repayment until they graduated and were earning A$28,000 or more a year.

The Howard government, elected in 1996, increased tuition charges and courses were grouped in three fee-bands according to tuition costs and future earning potential.

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The government also increased the rate of return by requiring graduates to begin repaying their Hecs debt once their threshold income reached A$20,000, which was well below the average wage.

Under the new rules, universities can allocate 25 per cent of the places in a particular programme to full fee-paying Australians. Although fewer than 1,000 students have so far opted to take up full-fee places, as demand increases this is another likely growth area.

Increased charges and the lowering of the income level doubled Hecs receipts - from A$850,000 in 1993 to A$1.7 billion this year.