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HECS debt timing quirk under review

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“There’s some confusion here in the debate around this,” he said.

“If you do what the Greens are talking about doing in getting rid of indexation altogether, it would cost the taxpayer $9 billion.”

North Sydney MP Kylea Tink, right, says she has been inundated with calls from constituents about the issue.Credit: Rhett Wyman

He emphasised that yearly indexation was not the same as interest paid on bank loans. It did not need to be repaid immediately as student loan repayments were calculated as a proportion of a person’s income.

Pegging HECS debts to inflation, Clare stressed, meant graduates paid the taxpayer back for loans at a level that reflected the contemporary value of money.

In other words, detaching student loan values from inflation would mean students paid a smaller amount of money over time than they had been loaned by the government, resulting in a loss to the taxpayer.

“The taxpayer doesn’t make a profit at all. If there’s a change to the way this works – the indexation – then effectively the taxpayer has to pay more,” Clare said on Friday.

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Tink said she had been disappointed with Clare’s response to calls to protect students from spikes in indexation, saying Labor had adopted a “classist … dog-whistling” approach.

But she welcomed Clare’s consideration of changing the timing of indexation and said it proved the power of the parliamentary crossbench to achieve policy changes.

Tink, who said she had been inundated with concerns from debt-loaded graduates, said one of her constituents had paid $12,000 off a $20,000 loan over the past 12 months but indexation was calculated on the original $20,000 amount.

Indexation should be tied to the lowest figure out of metrics such as inflation or the official cash rate to protect against one-off spikes in inflation, she argued.

Coalition education spokeswoman Sarah Henderson said she had raised the issue about the timing of indexation in Senate estimates this week and called on the government to reimburse those affected.

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