University graduates would save more than $3bn over a decade if the government changed the date of indexation on Hecs debts, dubbed a “broken system” in its current form by independent MP Monique Ryan.

About 3 million students and graduates will see their Hecs debts increase by $1bn on Monday, when they are indexed by 2.8%.

Hecs debts do not accrue interest but increase yearly based on the rate of inflation or the wage price index, to maintain the “real value” of the money owed.

Students make compulsory payments towards their Hecs, which are collected and held by the tax office, but that money isn’t deducted from the debt until the person has filed their tax return.

That is done after the debt indexes.

Costings by the Parliamentary Budget Office, seen by Guardian Australia, show if the government changed the indexation date from 1 June to 1 November, after compulsory payments have been paid down, it would cost the budget’s underlying cash balance $1.2bn in forgone revenue over four years.

Ryan, who commissioned the costings, said young Australians are already under immense pressure, and has called on the government to make the system fairer.

“Rising student debt is not an accident. It’s the result of deliberate policy choices made by Liberal and Labor governments,” Ryan said.

“We need to fix this broken system. When you make a payment on your home loan, its balance goes down. Graduates’ Hecs payments aren’t being accredited to their accounts in real time, and that’s costing them dearly.”

Analysis of the data shows in the first year students would save $58m in indexation, which would increase – as university fees, Hecs debts and the number of students grow – to more than $150m a year by 2035-36.

Social security payments including jobseeker, the aged pension and youth allowance are indexed every year, at different times. The aged pension, disability support pension and carer payments are indexed on 20 September each year, while jobseeker is indexed biannually on 20 March and 20 September.

On Thursday the education minister, Jason Clare, said Labor had already changed indexation rules in December 2024, to increase debts by the rate of inflation or the wage price index – whichever is lower. Labor also slashed Hecs debts by 20% in a 2025 election promise.

“We’ve already made some important changes to the way Hecs is indexed, and that had important benefits for young people right across the country … There is a lot of unfinished business and there’s more work to do,” Clare said.

“We want to make it easier for young people to get a degree cheaper and faster.”