HECS‑HELP Debt and Your Home Loan

HECS‑HELP Debt and Your Home Loan: How Student Debt Affects Your Mortgage Application in Australia

Buying a home is a big milestone – but if you’re like many Australians who studied at university, you may still have a HECS‑HELP debt to repay. Understandably, you might be wondering: does HECS debt affect home loan applications or borrowing power? The short answer is yes – a HECS-HELP student debt can influence how much you’re able to borrow for a mortgage. But it’s not a deal-breaker, and with the right approach you can absolutely achieve your property goals even while repaying your student loan. In this comprehensive guide, we’ll explain exactly what HECS-HELP debt is, how it shows up (or doesn’t) on your credit profile, and how different lenders assess HECS debt in practice. We’ll break down the impact of HECS debt on your borrowing power and loan serviceability, and share practical strategies to minimise its impact – from consolidating other debts and increasing income, to adjusting your property expectations if needed. We’ll also cover recent changes (like new lender policies and government updates) and answer frequently asked questions about HECS debt and home loans in Australia.

Our goal is to empower you with clear, accessible information so you can make informed decisions. By understanding how HECS debt factors into mortgage applications – and what steps you can take to improve your situation – you can approach lenders with confidence. Whether you’re a first-home buyer just starting out or a property investor still carrying a HECS balance, this article will help you navigate the process. Let’s dive in with the basics of HECS-HELP debt and why it matters when applying for a home loan.

What is HECS-HELP Debt, and How Does It Appear on Your Financial Profile?

HECS-HELP (Higher Education Contribution Scheme / Higher Education Loan Program) is the Australian government’s student loan program for tertiary education. In simple terms, it allows eligible students to defer their university fees and repay them later through the tax system. When you attend uni under HECS-HELP, the government pays your tuition upfront, and you accumulate a debt to the Australian Taxation Office (ATO) for that amount. You don’t have to make repayments until you’re earning above a certain income level (the HECS repayment threshold), at which point repayments are automatically taken out of your salary. Unlike a normal bank loan, you don’t receive bills for your HECS debt – it’s collected via the tax withholding process by your employer or when you lodge your tax return.

One key difference is that a HECS-HELP debt does not appear on your credit report. It isn’t a loan from a bank or credit card company, so it isn’t listed with credit bureaus. Having a HECS debt won’t directly hurt your credit score or show up when a lender checks your credit history. However, that doesn’t mean lenders ignore it. When you apply for a mortgage, you are required to disclose all debts and liabilities – including any HECS-HELP balance – on the application. The bank won’t see your HECS debt on a credit file, but they will find out about it through your declared financial information or your income documents. For example, if you’re above the income threshold for HECS repayments, your payslips will typically show additional tax deductions for “HELP” or “SFSS” (study loan) – a giveaway that you have a student debt. Lenders will ask about any existing debts (HECS included) to get a complete picture of your financial commitments.

It’s important to understand how HECS-HELP debt works in practice: there’s no interest rate charged like a normal loan, but the balance is indexed annually to inflation (CPI) to maintain its real value. In other words, your HECS debt grows in line with the cost of living. For many years this indexation was very low (often 1–3%), but recently higher inflation saw indexation jump to 7.1% in 2023 – a one-off spike that the government has since partially wound back via policy changes. Still, HECS debt is considered “cheap” debt because you’re not paying interest to a lender; you’re essentially paying back the government at cost. The current HECS repayment threshold (for the 2024–25 financial year) is about $54,435 in annual income – below that, you pay nothing; once you earn above that, you pay a percentage of your income that starts at 1% and gradually rises on higher incomes. The more you earn, the higher the percentage – for example, someone earning around $80,000 might repay 4–5% of their income, while very high earners pay up to 10%. These rates are set by the ATO and adjust slightly each year. Importantly, these are compulsory repayments – they come out of your paycheck (or are added to your tax bill) automatically once you’re over the threshold. You can also make voluntary extra repayments to ATO at any time if you wish to pay down the debt faster (for instance, using savings or a bonus to chip away at it), but it’s not required.

From a financial profile perspective, a HECS-HELP debt functions a bit like a tax obligation. It doesn’t show up as a monthly loan repayment on your bank statements because it’s taken out before your salary hits your account. This can actually make it easy to “forget” you have a HECS debt when budgeting for a home – until you realize that your take-home pay is a few hundred dollars lower each month due to those study loan deductions. Checking your HECS debt balance is straightforward: you can log in to your myGov account and access the ATO services to see your current HELP debt balance anytime. It’s a good idea to check your HECS debt before applying for a mortgage so you know exactly how much you owe. (You can also call the ATO for your balance, but online via myGov is easiest.) Your HECS debt balance will go down as you make repayments, but remember it also goes up slightly once a year with indexation (applied on June 1st each year). Keeping tabs on it will help you plan – especially if you’re close to finishing it off or if the balance is much larger than you realized due to indexation.

In summary, HECS-HELP debt is a unique type of debt: it’s owed to the government, collected through the tax system, and doesn’t appear on your credit report. There’s no interest, but it is adjusted for inflation. It will not directly impact your credit score or credit history. However, lenders will factor it into your finances because it does reduce your disposable income. Think of it this way: if you have a HECS debt, a portion of your future income is already spoken for by the government, and any mortgage lender will take that into account. Next, we’ll look at exactly how banks and lenders assess HECS debt when you apply for a home loan, and why they treat it a bit differently from other debts.

How Do Lenders Assess HECS Debt in Home Loan Applications?

When you apply for a home loan in Australia, every lender (banks and non-banks alike) will ask about your HECS-HELP debt and include it in their assessment of your borrowing capacity. Even though it’s not a traditional loan, from the lender’s perspective a HECS debt represents an ongoing financial commitment – you must continue to repay it (via tax) while also trying to service a mortgage. In practical terms, the bank needs to ensure you can afford both your HECS repayments and the home loan repayments on your income. So, how exactly do they account for it?

Most lenders handle HECS obligations by factoring in the annual HECS repayment you’re required to make based on your income. This can be done in a couple of ways:

• Treating it as an expense: Some lenders will include an extra line in your monthly expense budget for “HECS repayments” equivalent to that percentage of your income. For example, if your salary is $80,000 and you must pay 4% of that to HECS, they’ll count roughly $3,200 per year (about $267 per month) as an ongoing expense in your loan application.
• Reducing your income: Other lenders effectively adjust your income downward by the HECS repayment percentage. In the same example, instead of counting your full $80,000 income for borrowing capacity, they might treat it as if it were $76,800 after deducting the 4% that goes to the ATO.

Either method ends up with a similar result – your net income available for mortgage repayments is reduced because of your HECS debt. One thing lenders aim to avoid is double-counting the HECS impact. In the past, there was an issue where a borrower’s payslips showed net income after HECS tax withholding (which is already reduced), yet the lender also listed the HECS repayment as a separate expense, unintentionally subtracting it twice. Some major banks have noted this problem – essentially “double counting” the HECS repayment – and have adjusted their calculations to be fairer. The good news is most lenders now handle HECS more intelligently, either by reducing gross income or by counting it as an expense, but not both.

It’s important to note that lenders do not actually care about the total balance of your HECS debt – whether you owe $5,000 or $50,000 – nearly as much as they care about the amount coming out of your income right now to service it. A recent graduate with a $50k HECS debt who earns a low income might not be paying anything yet (if below the threshold), so in a lender’s eyes that HECS isn’t currently affecting their cashflow at all. In contrast, someone with a $10k HECS debt who earns a high salary could be paying thousands per year and thus feel a bigger impact on borrowing power. The ongoing repayment is what matters for loan serviceability, more so than the debt size. In fact, lenders often don’t even ask for the exact HECS debt balance on application forms – they ask whether you have one and how much your compulsory repayment is (or they derive it from your income). Of course, if your HECS debt is almost fully paid off, that usually means your compulsory payments will cease soon, and some lenders might be willing to overlook or temporarily discount those payments (more on that shortly).

Now, do all lenders treat HECS debt the same way? In principle, yes – they all include it in their serviceability assessment, but there are nuances and recent policy differences:

• Major banks: The big banks have traditionally been quite strict, treating HECS like any other liability. However, in 2023–2025 we’ve seen some major banks introduce more flexible policies. For example, Commonwealth Bank (CBA) announced it will no longer count a borrower’s HECS debt if it’s going to be fully repaid within the next 12 months. In other words, if you’re so close to clearing your HECS (perhaps via your next tax return or a small voluntary payment) that it will be gone in a year, CBA will ignore that debt in assessing your home loan. CBA also introduced a policy to partially relax the buffer they apply if your HECS will be paid off within 5 years – effectively making it easier to borrow if your student debt is on track to disappear in the near future. Similarly, National Australia Bank (NAB) recently announced that from 31 July 2025 it will disregard HELP/HECS debts up to $20,000 entirely in serviceability calculations. This means if your remaining student debt is $20k or less, NAB will act as if you have no HECS obligation at all when they calculate how much you can borrow. NAB’s change is aimed at helping first-home buyers and is a response to government calls to use “common sense” on HECS debt. It makes NAB the second big four bank (after CBA) to relax HECS treatment.
• Other banks and lenders: At the time of writing, the other major banks (Westpac and ANZ) have not publicly announced specific HECS concessions, but many industry experts anticipate they and other lenders may follow suit. In fact, the federal Treasurer Jim Chalmers earlier urged regulators to clarify that banks can overlook HELP debts in certain cases, calling it a “common sense” approach to help more Australians into a home. Regulators (APRA and ASIC) have since updated their guidance to explicitly allow lenders to disregard HECS-HELP repayments if the debt is going to be cleared in the near term. This essentially green-lights banks to be flexible, and we’re now seeing that translate into new lender policies. Apart from the big banks, many non-bank lenders and smaller institutions already had some discretionary flexibility – for example, some would ignore a very small HECS debt (say a few thousand dollars) or one that a borrower planned to pay off imminently. According to ASIC, lenders are permitted to use discretion and deem it appropriate to disregard a borrower’s student debt when calculating expenses if circumstances warrant. Not every lender will do so, but a good mortgage broker can identify which lender might be most generous if you have a HECS debt that’s nearly paid off or below a certain threshold. Essentially, lenders recognize that a HECS debt is a fact of life for younger borrowers and not necessarily a sign of financial risk or mismanagement.
• Income treatment differences: Lenders may vary in their technical approach. Some count HECS as a monthly liability, others adjust your income. The impact is similar, but if one lender’s calculator is overly conservative (for instance, if they accidentally double-count, or assume a higher repayment than necessary), it could reduce your borrowing capacity more than another lender would. The good news is many lenders have refined their methods recently to avoid unnecessarily penalizing borrowers with HECS. For example, NAB noted that treating HECS as a post-tax expense and using net income (which was already post-HECS-tax) led to double counting – so they changed their method to stop the double hit. The outcome is a slightly improved borrowing capacity for people with HECS under those lenders.

In general, all lenders will include your HECS repayments in their assessment, but some are now more lenient if your HECS debt is small or soon to be gone. This is a rapidly evolving area of lending policy. If one bank’s approach to your HECS debt results in a lower borrowing limit than you hoped, it’s wise to shop around or consult a broker – another lender might assess you more favorably. Remember, responsible lending rules require all lenders to ensure you can afford the loan, but there is room for interpretation in how HECS is counted. What’s uniform is that you must disclose the debt and the ongoing repayment; what differs is whether a lender might say “Oh, your HECS will be cleared next year, we won’t count it,” or “Your HECS debt is under $X, we’ll ignore it.” Those nuances can make a real difference in marginal cases.

One more point: HECS and your debt-to-income ratio (DTI). Banks often calculate a DTI ratio (total debt divided by gross income) for loan applicants. A high DTI (above 6 or 7) is seen as riskier. Currently, HECS debt is typically included in your DTI since it is indeed a debt you owe. However, regulators are considering changes here too. In early 2025, APRA (which oversees banks) proposed removing HELP debts from the official DTI metric that banks report. If adopted, this means in the future your HECS-HELP balance might not count against your DTI ratio for regulatory purposes, making it easier for banks to approve loans for people with large student debts. As of now, though, lenders do factor it in: technically it can nudge your DTI higher (though since HECS has no interest and is income-contingent, some banks view it as not as severe as other debts). The main takeaway: be transparent about your HECS debt with your lender or broker, and understand that policies can vary. All will include it in some form, but some will be more generous than others in how they calculate its impact. In the next section, we’ll quantify how HECS debt actually impacts your borrowing power – i.e. how much less you might be able to borrow – and why it’s usually a smaller effect than other common debts.

The Impact of HECS Debt on Your Borrowing Power and Serviceability

Having a HECS-HELP debt will affect your borrowing power to some extent – but how much impact it has depends on your income and the size of your compulsory repayments. Let’s break down why it matters. When a lender determines your borrowing capacity (how large a loan you can afford), they perform a serviceability assessment: basically a thorough look at your income, minus all your ongoing expenses and debts, to see what surplus is available to service a new mortgage. If you have any existing debt that requires repayments, that reduces the surplus income available for a home loan. HECS repayments are included in this calculation, meaning they effectively shrink the income slice that could go toward a mortgage.

Think of it this way: your HECS obligation is like a slice taken out of your income pie each month. It might be a relatively small slice, but it’s not negligible. For example, suppose you earn $75,000 per year. At that income, under current thresholds, you’d be in roughly a 3.5% HECS repayment bracket. That means about $2,625 per year (3.5% of $75k) goes to servicing your HECS debt via the ATO – around $219 per month. In effect, that reduces your take-home pay available for a mortgage by 3.5%. All else being equal, a lender would say your borrowing capacity is about 3.5% lower than it would be if you had no HECS debt. This is a simplified example, but it illustrates the proportional impact: the higher your compulsory HECS percentage, the more it chips away at what you can comfortably borrow.

Another way lenders look at it is in terms of annual cashflow. One rule of thumb some brokers use: for every $1 of annual HECS repayment, your maximum loan amount might drop by roughly $8 to $12 (depending on interest rates and lender formulas). Real-world scenario: if you earn $90,000 and are required to repay about $5,000 per year to HECS, a bank might lend you around $40,000–$50,000 less than if you had no HECS obligation. In fact, one mortgage broker gave an example of a client whose borrowing capacity was around $410,000 with a HECS debt versus roughly $460,000 if he had no HECS – about a $50k difference caused by a ~$4,500 annual HECS repayment. That roughly aligns with the 10× factor (every $1 of HECS payment reduced borrowing by ~$10 in loan). The exact multiplier can vary, but it demonstrates that tens of thousands of dollars in purchasing power can be lost due to HECS.

Before you panic, keep this impact in perspective: HECS is usually less damaging to your borrowing power than other common debts. Why? Because the repayment percentages are relatively low for most people, and there’s no high interest or large mandatory monthly repayment (it scales with income). Lenders know that a HECS debt is practically a payroll tax – it’s widespread and automatically deducted. It doesn’t signal reckless spending or credit risk. Contrast this with, say, a credit card debt or personal loan: those come with interest rates and fixed repayments that can really squeeze your budget. For example, a $20,000 credit card limit (even if fully paid off) might force a lender to assume ~$600 per month in possible repayments (they often count 3% of the limit), which can slash your borrowing capacity by well over $100,000. A car loan might have a fixed $500/month repayment, which similarly chunks out what you can borrow. HECS doesn’t hit that hard. It’s typically a smaller percentage of income, and if your income is modest, the percentage is minimal or zero. Additionally, because HECS is income-adjusted, lenders see it as lower risk – if you lost your job, your HECS repayments would stop (since they’re not required below the threshold), whereas you’d still have to pay your car loan or credit card minimums regardless. As one lender quipped, “HECS is a fact of life for younger borrowers” and banks tend to focus more on harsher debts like credit cards. They will factor HECS into your debt-to-income ratio and serviceability, but it’s usually not a deal-breaker unless your HECS repayment is very high relative to your income.

Let’s illustrate with a couple more examples to see the range of impact:

• Example 1: Low income, small HECS – Sarah earns $50,000 a year as a recent graduate. The current threshold for any HECS repayment is about $54k, so Sarah is below the HECS repayment cutoff and isn’t paying anything toward HECS yet. Even though she has a $20,000 HECS debt from her degree, for now it’s dormant (no compulsory repayments). If she applies for a home loan at this income, most lenders will effectively treat her as if she has no HECS obligation at the moment. Because her income is under the threshold, the HECS debt has no impact on her borrowing capacity in the present. (The lender may note she has a $20k HECS balance that will eventually need to be paid, but if it’s not affecting her current cashflow, it doesn’t reduce what she can borrow today. Of course, if Sarah’s income rises above $54k, then repayments kick in and the equation changes.)
• Example 2: Middle income, average HECS – Alex earns $85,000 a year and has a HECS debt of $30,000 remaining. At $85k income, Alex’s compulsory HECS repayment rate is around 4.5%. That’s about $3,825 per year (or ~$320 per month). Let’s say based on his salary and no other debts, a bank might have lent Alex $460,000 if he had no HECS. With the HECS obligation, the lender subtracts that $320 from his monthly available income and might end up offering roughly $410,000 instead. Alex effectively loses about $50k of borrowing power due to HECS. He can still get the loan, just a bit smaller than if he were HECS-free.
• Example 3: High income, large HECS – Priya is a medical professional earning $140,000 a year, but she also has a hefty HECS debt of $60,000 from years of study. At $140k income, her HECS repayment rate hits the maximum 10%, so $14,000 a year (about $1,167 per month) is going to the ATO for HECS. That’s a sizable chunk. A lender might have qualified her for, say, a $800,000 loan with her income if she had no HECS. Now they must account for the fact that every month $1,167 of her income is pre-committed – which could reduce her borrowing capacity by on the order of $100k or more, perhaps down to ~$700,000. It’s not insignificant. The flip side: Priya’s high income means she’ll likely clear that $60k HECS in a few years. Some lenders might recognize that and be a bit more flexible (especially with new guidelines), but they will still ensure she can afford the loan while that HECS is being paid.

In all these cases, notice that the HECS debt didn’t stop the person from getting a home loan – it just affected the size of the loan they could comfortably service. Lenders do not “reject” people just for having a HECS debt. In fact, millions of Australians in their 20s and 30s have HECS-HELP debts, and it’s entirely routine for banks to lend to them. The bank’s main concern is serviceability: can you afford the new loan repayments on top of all your existing commitments (HECS included)? If the answer is yes, you’ll be approved; if adding a mortgage on top of your HECS and other expenses would be too much for your income to handle, then they’ll either approve a smaller loan amount or possibly decline the application.

One more factor to consider is lender buffers and stress testing. All lenders apply a buffer to interest rates when calculating your ability to repay – currently, banks add 3% on top of the loan’s interest rate to ensure you could handle higher rates (this is an APRA guideline). This means your finances are tested against a hypothetical mortgage repayment much larger than the actual initial repayment. If you have a HECS repayment eating into income, it compounds with this buffer – your surplus income must cover the “stress-tested” mortgage payment. That’s why even a few hundred dollars a month to HECS can trim your max loan amount notably. Some banks, like CBA, have started to relax the buffer slightly for those close to clearing HECS (removing 2% of the buffer in certain cases), which can boost borrowing power for those borrowers.

In summary, HECS debt does reduce borrowing power, but usually modestly – often on the order of a few percent of your loan size, or say 5–10% less loan than without HECS. In contrast, other debts can reduce it by larger fractions. Lenders generally view HECS as a manageable, low-risk debt, and they understand it’s “good debt” taken on to invest in education. It doesn’t carry the same stigma as credit card debt. As long as you can comfortably service both your HECS and the new loan, banks are happy to lend. The key for borrowers is to be aware of the impact and, if needed, take steps to minimise that impact. That leads us to our next topic: what can you do to improve your situation if you have HECS debt and want to maximize your home loan potential?

Strategies to Minimise the Impact of HECS Debt on Your Mortgage Application

Don’t let a student debt discourage you – there are plenty of strategies to improve your borrowing power and make your home loan application stronger, even with a HECS debt. Remember, having a HECS-HELP balance is very common and won’t prevent you from getting a home loan, but using these tips can help offset its effects:

• Pay down other debts first: Prioritise clearing high-interest debts like credit cards, car loans, or personal loans before worrying about extra HECS repayments. Other debts typically weigh far more heavily on your borrowing capacity because they come with interest and fixed monthly obligations. Every dollar of credit card limit or personal loan payment you can eliminate will free up more of your income for a mortgage. For example, if you have a credit card with a $10,000 limit, consider reducing that limit or cancelling the card if you don’t truly need it – lenders assume a portion of that limit as potential debt, which might be reducing your borrowing capacity by tens of thousands of dollars. By comparison, HECS is low-cost debt, so financial experts often advise tackling other liabilities first. Reducing or consolidating those obligations (perhaps via a debt consolidation loan or simply paying them off) will improve your debt-to-income ratio much more than paying extra off your HECS.
• Consider paying off HECS early (in some cases): If your HECS debt is relatively small or nearly paid off, wiping it out before applying for a mortgage can boost your borrowing power a bit. Eliminating that 1–10% income deduction increases the income a lender can use in their calculations. This strategy can be especially helpful if you’re just shy of a borrowing amount needed for the home you want. However, don’t rush to throw all your savings at HECS without weighing the trade-offs. You should not sacrifice your home deposit or emergency savings just to be HECS-free. For instance, if you have $10k left on HECS but that $10k could be the difference in reaching a 20% house deposit (and avoiding lender’s mortgage insurance), you’re probably better off using it for the deposit. Lenders generally don’t consider how soon your HECS will be paid off (unless it’s within 12 months under certain bank policies) – they care about what you’re paying now. So if paying off HECS would leave you short on deposit or with no savings buffer, it’s usually not worth it. On the other hand, if you have plenty of savings, no other debts, and a small HECS balance, clearing it could simplify your finances and slightly up your borrowing capacity. It really depends on your situation, so do the math (or ask your broker to) before making a big payment to the ATO. A good rule: Don’t trade a stronger deposit for a slightly lower HECS balance – the deposit is more important for approval.
• Boost your deposit (savings): Speaking of deposits, saving a larger deposit can directly improve how much you can borrow and make a lender more comfortable. A bigger deposit means you’re borrowing less relative to the property value, which lowers your loan-to-value ratio (LVR). This can not only increase the amount the bank is willing to lend (since you’ve demonstrated strong saving ability), but can also get you better interest rates or avoid extra costs like LMI (Lenders Mortgage Insurance). From a serviceability standpoint, if you’ve managed to save, say, 15–20% of the purchase price while also paying HECS, you’ve proven that your HECS repayment isn’t preventing you from budgeting wisely. Lenders love to see genuine savings. So, in preparation for a home loan, try to turbocharge your savings: cut unnecessary expenses, set up a budget, possibly use tools like the First Home Super Saver Scheme (which allows you to save for a deposit within your superannuation at a tax advantage). Every extra dollar saved is one less dollar you need to borrow. Essentially, compensate for the drain of HECS by building up a bigger cash reserve – it shows you have surplus capacity despite the HECS. The deposit not only helps with approval but also reduces your monthly mortgage payments (since you’re borrowing less), making ongoing affordability easier alongside your HECS.
• Reduce your living expenses and tighten your budget: Lenders scrutinize your recent living expenses (from bank statements or declared budgets) to ensure you’ll be able to handle loan repayments. By trimming your discretionary spending in the months leading up to your application, you can show a higher surplus. When a HECS repayment is non-negotiable, controlling the negotiable expenses can offset it. Take a hard look at your subscriptions, dining out, shopping, etc., and see where you can cut back – even temporarily – to improve your expense profile. For example, if you can reduce your monthly spending by $200, that’s $200 more in free cash flow, which might balance out a similar amount going to HECS. Some hopeful buyers even practice living on their expected “new budget”: since your HECS and future mortgage will both need to be paid, try simulating those payments now. Set aside the equivalent of a projected mortgage payment each month (perhaps into savings) while continuing to pay your HECS via your salary. This does two things: (1) it helps you build more savings (the money you set aside can go toward your deposit or costs), and (2) your bank statements will show that you comfortably handle your current rent and expenses plus that extra saving (which demonstrates capacity). Essentially, you’re proving to yourself and the bank that you can manage the mortgage and the HECS. By tightening up your budget, you’ll not only increase your serviceability on paper, but you’ll also enter homeownership with good financial habits.
• Lower your credit limits or eliminate unused credit: As mentioned earlier, outstanding credit card limits or buy-now-pay-later accounts can significantly reduce your borrowing power, even if you’re not using them. Lenders usually assume about 3% of all credit card limits as monthly debt commitments. So if you have a $15,000 credit card limit for “just in case” but it’s usually zero balance, the bank still factors around $450 per month as a potential payment. That $450/month might reduce your maximum loan by tens of thousands. If you’re not truly using that credit, consider lowering the limit or cancelling the card before you apply. This will improve your debt-to-income profile. It’s often an easier way to boost borrowing capacity than trying to pay off your HECS early, because a credit card’s assumed payment might be larger than your HECS payment. The same logic goes for things like Afterpay or Zip Pay accounts – close them out if possible. The cleaner your financial slate aside from HECS, the better.
• Increase your income (if possible): It might be easier said than done, but any increase in income will directly improve your borrowing power. Since HECS repayments are a percentage of income, when your income rises, yes, you’ll pay a bit more in HECS – but you keep the majority of that raise for yourself. For example, if you get a $5,000 raise and you’re in a 5% HECS bracket, an extra $250 goes to HECS and you keep $4,750. Your borrowing capacity will be calculated on that higher net income. Ways to boost income could include seeking a promotion or raise at work, working overtime, starting a side hustle, or even picking up a second job if feasible. Keep in mind lenders typically like to see stable and ongoing income – a one-off bonus is great for your bank account but might not count towards what the bank considers for serviceability unless it’s regular. However, even a consistent overtime history or a secondary income stream can help. If you know you have a bonus or commission coming, that can strengthen your financial position (some people time their home loan application for after they receive a bonus, which improves their savings and perhaps bump their income figure). Also, if your income goes up significantly, you might jump into a higher HECS bracket – but those brackets only increase gradually. For instance, going from $70k to $80k income might raise your HECS rate from 3% to 4%, but you’ve gained far more in take-home pay than you lost in extra HECS. Overall, a higher income dilutes the impact of HECS on your budget and makes every aspect of your loan application stronger. Just be sure any new income is documented and stable (a new job probation period or cash-in-hand gig might not count immediately). If a big raise is on the horizon, you might choose to wait to apply until that kicks in – the improved income (even with slightly more HECS) can increase the loan amount you qualify for.
• Use windfalls or bonuses wisely: If you get any lump sum money – tax refund, annual bonus, inheritance, etc. – consider how to best use it. One option is to make a voluntary HECS repayment if that would significantly change your situation. For example, suppose you owe $10,000 in HECS and you’re paying 5% of income. If you got a $5,000 tax refund and used it to halve your HECS balance, it might not immediately reduce your compulsory percentage (which is based on income thresholds), unless it drops your balance low enough that you’ll finish the debt sooner. Actually, a more strategic play is if you’re near an income threshold crossover – say you’re right above a bracket where you pay 5% and if your HECS were a bit smaller you’d drop into the 2% bracket. In that case, using a windfall to knock your HECS below a certain balance could mean you finish it earlier or reduce your required repayment rate (if legislative changes tie rates to balances or remaining term in the future). As of now, the percentage is purely income-based, so reducing your balance won’t change the percentage this year – but it could mean you’ll clear the debt sooner and potentially, under some bank policies, that might help (e.g. being debt-free within 12 months). There’s talk of new rules where if your HECS will be cleared in 5 years, banks might ease up. So if a lump sum can ensure your HECS is gone in a couple of years, it might put you in a better light with lenders. Nonetheless, don’t automatically throw windfalls at HECS if it doesn’t tangibly improve your borrowing capacity. It might be better used for your deposit or to pay off a high-interest credit card, for example. Remember, voluntary HECS payments are irreversible – you can’t get that money back, and you can’t use a HECS debt as security for a loan. So only deploy extra cash to HECS if you’ve calculated that it’s the best boost for your homeownership plans. A balanced approach could be to split a windfall: maybe put some towards HECS if it’ll eliminate the debt or significantly reduce it, and put the rest toward your house deposit or other needs.
• Adjust your property goals (if needed): This is more of a mindset strategy. If, after doing everything above, you find that your HECS debt means you can “only” borrow, say, $400k instead of the $450k you hoped for, you might need to reset your property expectations accordingly. That could mean looking at more affordable suburbs, considering units or townhouses instead of houses, or perhaps waiting a little longer while you improve your finances. There’s no shame in aiming for a slightly cheaper property as a stepping stone. You can always upgrade later when your income is higher or your HECS is paid off. The important thing is to buy within a comfortable budget. Stretching too far with a high debt load (even if a bank would allow it) can put you under stress. Sometimes, adjusting your target purchase price by even 5-10% can turn a declined application into an approval. For example, if a lender says you’re capped at a $500k loan based on your situation with HECS, but you wanted $550k, consider if you can find a property a little cheaper or increase your deposit to make up the difference. It might also be an option to use a first-home buyer scheme or family guarantor to extend your reach – e.g. the First Home Guarantee (formerly FHLDS) can let you buy with a smaller deposit, which doesn’t directly increase borrowing power but can get you into the market sooner with the loan amount you do qualify for. Being flexible with your goals ensures you don’t miss out on entering the property market just because of a HECS constraint. Many people buy a starter home or investment within their means and then upgrade later once their income grows (and HECS is long gone by then).

In applying these strategies, it’s often a balancing act. You want to minimise the impact of HECS without undermining other aspects of your financial health. In many cases, improving other parts of your profile – paying down car loans or credit cards, saving more, budgeting better – will yield a bigger boost to your borrowing power than rushing to pay off HECS completely. Every borrower’s circumstances are different, so it can be very helpful to talk to a mortgage broker or financial adviser who can do scenario analysis for you (e.g. “What if I paid off $5k of HECS vs. kept it for my deposit?” or “How much more could I borrow if I close this credit card?”). A mortgage broker, in particular, can also identify lenders who might be more forgiving of your HECS debt. With the right strategy, you can present a strong loan application and achieve home ownership without needing to be 100% HECS-free.

To illustrate, here’s a quick case study:

Case Study – Balancing HECS and Home Ownership: James has a HECS debt of about $60,000 from postgraduate study. He earns $100,000 per year, putting him in a 6% HECS repayment bracket (around $6,000 per year goes to HECS). Initially, James worried that this would kill his chances of getting a decent home loan. A broker calculated that with the HECS, James could borrow roughly $500,000; if HECS wasn’t in the picture, maybe about $560,000. So the HECS was reducing his capacity by ~$60k – significant, but not a deal-breaker for getting into the market. James had saved $70k, aiming for a 10% deposit on a $600k property. He considered using a big chunk of savings to pay off HECS, but $60k of HECS was too high to clear fully, and using his savings for that would leave little for a deposit. Instead, he chose to leave the HECS as is, and put $60k of his savings toward a house deposit. With that, and using the federal First Home Guarantee scheme (allowing a low deposit with no LMI), he was able to purchase a $630k townhouse with a 5% deposit (around $30k) and a $600k loan. His HECS continues to be deducted from his pay, but he budgeted for it and can comfortably handle both the mortgage and the HECS payments. The result: even a large HECS debt didn’t stop James from buying a home. It reduced the loan amount a bit, but by focusing on what he could control – saving a solid deposit, leveraging a government scheme, and not adding other debts – he made it work. His broker noted that many clients in their 20s and 30s have HECS, and lenders are very used to it. The key is to control the other variables (income, expenses, deposit, additional debts) more so than the HECS itself, unless there’s an easy opportunity to eliminate it.

The bottom line: You do not need to be HECS-debt-free to get a home loan. By using these strategies, you can put your best foot forward. Reduce and streamline other debts (or even consolidate them if that lowers your overall payments), keep your spending in check, save as much as possible, and explore lender options. Many Australians successfully buy property while carrying student debt – it just takes a bit of planning and perhaps some adjustments to your approach.

Recent Changes to HECS-HELP and Lender Policies (2023–2025 Updates)

The landscape around HECS-HELP debts and how they’re treated in lending has been evolving. Both government policy changes and lender criteria updates in the last couple of years aim to make it easier for Australians with student debt to buy homes. Here are some of the recent changes and news to be aware of:

• Major Banks Relaxing HECS Assessments: As mentioned earlier, two of Australia’s big banks have implemented borrower-friendly changes:
  • Commonwealth Bank (CBA): In early 2025, CBA announced it will ignore HELP/HECS debt if it’s going to be fully paid off within 12 months. So if you’re on track to finish your HECS very soon (for example, a small balance that will be cleared with your next tax return payment), CBA won’t count those HECS repayments in your loan application at all. Additionally, CBA will reduce the serviceability buffer by 2% for applicants who will pay off their HECS within 5 years. Normally the bank tests your ability to repay at an interest rate 3% higher than the current rate (the buffer). By cutting that buffer down (to effectively 1% extra) for those with soon-to-expire HECS debts, CBA is allowing such borrowers to qualify for a larger loan than they otherwise would – recognizing that their cash flow will improve once the HECS is gone.
  • National Australia Bank (NAB): NAB followed suit with a major change effective 31 July 2025 – it will completely disregard HELP debts up to $20,000 when assessing home loan applications. If you owe $20k or less on HECS, NAB will not reduce your borrowing power because of it at all. This is great news for many recent graduates and young professionals, as a large share of Australians have HECS debts in that range or lower. NAB’s executives said this change could significantly increase borrowing capacity for those customers, helping them buy a home sooner. It’s pointed out that “for too long HELP debt has been a roadblock” for buyers, and this move is intended to remove that roadblock.
  • Other Lenders: These moves put competitive pressure on other banks and lenders. Westpac and ANZ, as of mid-2025, haven’t publicly declared specific HECS leniency, but industry watchers expect they might, especially with prompting from regulators and government. Some non-bank lenders may have already been more flexible on a case-by-case basis (since they’re not bound by APRA’s bank reporting rules, they can use more discretion). We could see more institutions announcing similar policies – for instance, ignoring HECS if under a certain amount or if close to repaid. Lenders are also aware that many first-home buyers (their target customers) carry student debt, so they are keen to appear accommodating and “first-home-buyer-friendly.” Keep an ear out for announcements from various lenders, especially as competition for borrowers heats up.
• Government Pressure and Regulatory Guidance: The Australian Government has been actively involved in pushing for these changes:
  • In February 2025, Treasurer Jim Chalmers asked regulators (APRA and ASIC) to clarify that banks can take a common-sense approach to HELP debts. Soon after, APRA and ASIC updated their lending guidance to explicitly allow what we described: banks may disregard a HECS-HELP debt or its repayments if the applicant is expected to pay it off in the near term. Chalmers called this a “common sense” measure to help more young people into home ownership. Regulators essentially gave banks the green light to be lenient without fear of breaching any responsible lending metrics.
  • APRA also started a consultation in 2025 proposing to remove HECS from the official debt-to-income (DTI) calculations that banks report and possibly to not count HECS for certain macro-prudential limits. While banks always internally counted HECS for serviceability, APRA had been counting it in DTI ratios that it monitors across the banking system. By potentially excluding HECS, APRA would allow banks to lend slightly more freely to those with student debt, since it wouldn’t push their DTI ratios into “high” territory by regulatory definitions. This is expected to formally change by late 2025 (if implemented).
  • The Treasurer’s intervention and APRA’s proposals indicate a broader acknowledgement: HECS debt was creating an extra hurdle for first-home buyers, and policymakers want to ease that hurdle. The Australian Banking Association even noted that previous APRA/ASIC guidance was a cause of reluctance among some banks to lend to first-home buyers with HECS, so clarifying it has been welcomed.
• HELP Debt Policy Reforms (Universities Accord 2025): Perhaps the biggest news for anyone with a HECS-HELP debt came in mid-2025: the federal government introduced legislation to wipe 20% off all outstanding student loan debts and make the repayment system more generous. This one-off 20% reduction, if passed by Parliament, will apply to all HELP debts (HECS, HELP, VSL, etc.), benefiting over 3 million Australians. For example, someone with $30,000 remaining would have $6,000 forgiven, and only $24,000 remaining. The legislation was put forward in July 2025 as part of the Universities Accord reforms. It’s not law yet at the time of writing, but the government is strongly behind it. This measure is explicitly aimed at alleviating cost-of-living pressures and acknowledging that “70% of people repaying a HELP debt are 35 or younger” – a cohort for whom this is a critical time for saving for a home. Less student debt means those Australians can redirect income towards mortgages and other goals. If this passes, your HECS-HELP balance could drop overnight by 20%, which in turn would reduce your future compulsory repayments (since 1-10% of a smaller balance will finish sooner, potentially meaning you’re done with HECS earlier).
  • Along with the debt reduction, the government also announced plans to raise the income threshold for HECS repayments from about $54,000 to $67,000 (likely for the 2025–26 year). That’s a massive increase in the threshold – meaning you wouldn’t start repaying HECS until you earn above $67k. And even then, the lowest repayment rate might be reduced. In essence, if this becomes reality, many lower and middle-income earners will temporarily pay nothing on HECS, allowing them to direct that money to other needs (like saving for a house). For a mortgage application, someone earning $60k currently would have to allocate a small percentage to HECS; under a $67k threshold, they’d have $0 HECS repayment, boosting their borrowing power. The proposal also mentioned lowering some of the repayment rates, so the percentage of income at each bracket could drop, leaving more take-home pay in borrowers’ pockets. All these changes would make it easier to service a mortgage while repaying a student loan.
  • Additionally, the government moved to cap HECS indexation at the rate of wage growth if it’s lower than CPI. This was in response to the 2023 scenario where inflation was high (7.1%) but wages weren’t keeping up. They effectively said indexation will never exceed wage growth going forward. In fact, they retroactively applied this in 2023 and 2024 – so the 7.1% indexation in 2023 was adjusted down to 3.2%, and 2024’s ~4.7% was adjusted to ~4.0%. This reduces how quickly HECS debts grow and prevents nasty surprises for borrowers. For you, that means your HECS balance will be more stable and hopefully smaller than it would have been, making it that much easier to pay off eventually (or to handle alongside a home loan).
  • In short, the government is actively making changes to reduce the burden of HECS debt for Australians, which in turn should help with loan serviceability. Cutting all HELP debts by 20% and raising thresholds will significantly lighten the load, effectively increasing many people’s borrowing capacities overnight. (For example, with 20% less debt, some people might drop a bracket in repayment rate or finish payments years earlier – all positives when applying for a loan.) These changes are aimed at fairness and are part of a broader initiative to improve housing affordability by enabling more young people to buy homes.
• Economic Environment: It’s also worth noting the broader context. Over 2022–2023, interest rates on mortgages rose sharply, which reduced borrowing capacity for all borrowers (because of higher assessed repayments and the 3% buffer). At the same time, that 7.1% indexation in 2023 made headlines – many felt “double-whammied” with rising mortgage costs and ballooning student loans. The recent changes (both lender-side and government-side) are partly a response to these conditions. They’re trying to level the playing field for first-home buyers with student debt in a tough market. For instance, APRA’s decision to keep the 3% buffer in 2023/24 drew criticism for being overly strict, so instead of cutting the buffer, they’re finding flexibility in other areas like HECS treatment. The goal is to boost borrowing capacity responsibly – letting banks lend a bit more to those with HECS, without creating undue risk. From a borrower’s perspective, it means things are trending in your favor: banks are increasingly willing to overlook small HECS debts, and policy changes may reduce your HECS faster or delay when you start repaying, all of which improve your ability to borrow for a home.

In summary, the period from 2023 to 2025 has brought significant positive changes for homebuyers with HECS-HELP debts. Major lenders are softening their stance on HECS, guided by regulators urging a pragmatic approach. The government is enacting measures to slash student debt balances (by 20%) and ease repayment obligations, directly targeting the demographic that’s also trying to enter the property market. These changes recognize that a generation of Australians have much larger HECS debts than prior generations (often $30k+ averages) and need a leg up to achieve home ownership.

What should you do? Keep informed about these changes. If you’re applying for a loan, ask lenders or your broker about their current HECS debt policy – it might save you thousands in borrowing capacity if you choose a lender who ignores your $15k HECS, for example. And if the law passes to reduce HELP balances or raise thresholds, be sure to factor that into your planning (e.g. you might suddenly owe less, or you might not have to pay anything until you earn more, which could make a big difference to your budget). The bottom line is that the environment is improving for borrowers with HECS. Combine these favorable changes with the personal strategies we discussed, and you’ll be in a strong position.

Now, let’s address some frequently asked questions about HECS debt and home loans to clear up any remaining concerns or common queries.

Frequently Asked Questions (FAQs) about HECS Debt and Home Loans

Q: Does having a HECS debt affect my ability to get a home loan?
A: Yes, a HECS-HELP debt can affect your borrowing power, but it will not automatically prevent you from getting a home loan. Lenders include your compulsory HECS repayments in their calculations, which means you might qualify for a slightly smaller loan than if you had no HECS. Essentially, part of your income is committed to HECS, so the bank has to allow for that. However, as long as you can comfortably afford the mortgage and the HECS payments, banks are generally willing to approve the loan. Millions of Australians have both a HECS debt and a mortgage. It’s considered a normal part of the financial landscape. The impact is typically a reduction in borrowing capacity (for example, you might borrow tens of thousands less than otherwise), but it’s usually not a make-or-break factor. And as discussed, some lenders now even ignore small HECS debts or ones nearly paid off, which can eliminate the impact entirely in those cases.

Q: Will my HECS debt make my mortgage application get rejected or my interest rate higher?
A: No, having a HECS debt by itself is not a reason for rejection, nor does it increase your interest rate. Lenders do not charge you a higher home loan rate just because you have a student debt – interest rates are typically determined by the loan-to-value ratio, loan product, and your credit score (and HECS doesn’t appear on your credit report). As long as you meet the lending criteria (sufficient income, stable job, acceptable deposit, etc.), your HECS is simply treated as one line in the budget. Banks won’t decline you just for having HECS, and in fact they expect many first-home buyers will have a HECS-HELP debt as it’s so common. The key is that after accounting for your HECS payments, your income still needs to cover the new loan repayments comfortably. If there are issues, it might be more about total affordability or other debts, rather than HECS alone. So focus on your overall profile. If an application is rejected, it’s usually due to insufficient serviceability in general – HECS might have contributed, but it wouldn’t be the sole cause unless your situation was right on the edge.

Q: Does my HECS-HELP debt show up on my credit report or affect my credit score?
A: No, HECS debt does not appear on your credit file and does not directly affect your credit score. Credit reports track loans, credit cards, and other credit accounts you’ve opened with financial institutions, as well as any payment defaults. A HECS-HELP loan is a government debt, not a credit contract, so it isn’t reported to credit bureaus. Not having it on your credit report means that simply having a HECS debt won’t lower your credit score. In fact, a HECS debt won’t show up to any creditor except the ATO. However, while it’s not on your credit history, lenders will still ask you about it during the loan application (and you must answer honestly). They incorporate it into their internal affordability assessment, which is separate from your credit score. So, rest assured your HECS won’t hurt your credit rating – but it can affect how much you can borrow due to the income it siphons off. Always disclose it accurately; lying about it won’t help, since banks can detect it from payslips or tax returns, and dishonesty could jeopardize your application.

Q: How do lenders know I have a HECS debt if it’s not on my credit report?
A: Lenders find out through the information you provide and your income documents. On the loan application form, there is usually a question asking if you have any student loans (HECS-HELP) and what the repayment amount is. Even if you didn’t disclose it, your payslips can reveal it – if you’re above the threshold, your employer withholds additional tax for HECS, so your payslip or income statement will show something like “HELP debt deduction” or a higher tax rate category. Another way is through your tax returns/Notice of Assessment. If you’ve done a tax return while having a HECS debt, the Notice of Assessment often includes a line about a compulsory HELP repayment and may note your remaining debt. Lenders often ask for recent tax returns or NOA for full-documentation loans, and that would make it clear. Additionally, during the loan process, you typically sign a form allowing the lender to verify your tax details with the ATO (an ATO portal printout can show your HELP balance if needed). So, even though it’s not in your credit file, there’s no hiding a HECS debt from a lender. The best approach is to be upfront – declare the debt and its details. Lenders appreciate transparency and will work with the real numbers. They already expect many applicants will have a HECS debt, so it’s nothing embarrassing or unusual to disclose.

Q: Should I pay off my HECS debt completely before applying for a mortgage?
A: It depends on your circumstances. In many cases, you do not need to pay off HECS before getting a mortgage. If your HECS debt is small and you have plenty of savings, paying it off could slightly improve your borrowing power (since it removes that obligation). This might be worthwhile if, for example, clearing a $5,000 HECS debt would increase your loan capacity enough to afford the property you want – and you can pay that $5k without harming your deposit or emergency fund. On the other hand, if your HECS debt is large or if using savings to pay it down would leave you short for a home deposit, it’s usually better to keep the savings for the house and just continue paying HECS gradually. Remember, HECS is interest-free (inflation-indexed only) and usually low-impact compared to other debts. Lenders are used to seeing it, and as long as you can service it, they don’t mind if you carry it into the mortgage. In fact, many financial advisers suggest not rushing to pay off HECS early unless you have a very specific reason, because that money might serve you better paying off higher-interest debts or investing in a home. There’s also currently no discount or benefit for voluntary early repayment (the government removed the voluntary repayment bonus years ago), so there’s no financial reward for paying it off sooner, except reducing indexation effects. A good compromise: if your HECS is just below a threshold or will be gone in a year or two, you could let it be and focus on getting the home – you can always pay it off later once you’re settled, or it might finish on its own through tax as your income grows. Every situation is unique, so consider speaking with a broker; they can actually model your borrowing capacity with vs. without your HECS debt. You might find the difference isn’t big enough to justify paying it off and delaying your home purchase.

Q: Can I roll my HECS debt into my home loan (debt consolidation)?
A: Generally speaking, no, you can’t directly “consolidate” a HECS-HELP debt into a mortgage at the time of home purchase – at least not in the way you would a car loan or credit card. HECS is not a tradable or transferable debt; you owe it to the government and it must be paid through the tax system (or voluntary payments to the ATO). A bank won’t refinance or pay out your HECS debt as part of a home loan settlement because there’s no mechanism for them to do so (unlike, say, paying out a personal loan with loan funds). That said, if you already own a property with equity or you’re taking a mortgage larger than the property price (some lenders allow cash-out for various purposes), you could theoretically withdraw equity to make a voluntary HECS payment. But this is rarely done and often not advisable. Why? Because you’d be converting a 0%-interest (indexed) debt into a compound interest debt (your mortgage) where you’ll pay interest over potentially 30 years. Unless your HECS indexation is higher than your mortgage interest rate and you plan to pay off that extra portion quickly, it usually doesn’t make financial sense. Most experts do not recommend paying off HECS with more expensive debt. Instead of consolidating HECS into your home loan, focus on other debts – many people do consolidate credit cards or personal loans into a mortgage refinance to get a lower rate, and that can be smart if done carefully. But with HECS, you’re already at the lowest “interest” cost possible (just inflation). One scenario where it could make sense: if inflation is extremely high (making HECS indexation high) and you can lock in a lower fixed mortgage rate and you have the borrowing capacity to add the HECS amount to your loan. But you’d need to compare the costs, and remember once you add it to the mortgage, you’ll pay interest on it until it’s paid off. In short, there’s no straightforward product to consolidate HECS into a new home loan, and in most cases you’re better off leaving it separate. If your bank pre-approves you for enough, just take the mortgage for the house – don’t increase it to pay HECS. You can continue paying HECS out of your salary as normal. The only time you’d fully clear HECS at mortgage time is if you choose to pay it off out of pocket (like from savings) just to eliminate the obligation – but that’s not consolidating into the loan, that’s just paying it off.

Q: Does HECS debt count in my debt-to-income ratio (DTI) and could it make a lender say my DTI is too high?
A: Currently, many lenders do factor HECS debt into your DTI ratio, because technically it is debt. DTI is total debts divided by gross income. Some banks might multiply your HECS annual repayment by a certain number to approximate a “loan amount equivalent” and include that in debt, or they might include the outstanding balance as part of your debts. However, since HECS doesn’t have a traditional repayment schedule, DTI is not as straightforward to apply. In practice, lenders are more concerned with the serviceability calculation (income vs. expenses) than the raw DTI when it comes to HECS. If your DTI is borderline high (say above 6 or 7), having a large HECS debt could push it slightly higher. But regulators have signaled that they don’t view HECS debt in the same light as other debts for DTI purposes – APRA has proposed removing it from DTI calculations banks report. Some lenders might already unofficially exclude HECS from the DTI metric when making decisions (focusing instead on the actual repayment percentage). So, while yes, if you have a $100k HECS debt and a $500k mortgage your raw DTI looks higher than someone with no HECS, banks know that HECS is tied to income and not like a normal loan. It’s very unlikely a lender would reject a loan solely because of DTI including HECS. They will look at your overall ability to repay. If you’re concerned, ask your broker or bank how they treat HECS in DTI. The trend is toward excluding or de-emphasizing it in that ratio. Focus more on the cashflow side – that’s where HECS has its effect (and that we already accounted for).

Q: I’m a property investor with a HECS debt – is the assessment any different than for an owner-occupier first-home buyer?
A: The calculation of HECS impact is essentially the same regardless of the purpose of the loan. If you’re an investor applying for a new mortgage, the lender will still include your HECS repayments in your expense budget. The only differences might come from other factors: for instance, investors often have rental income and different expense considerations. One nuance: when the ATO calculates your HECS repayment, it uses your taxable income plus any net rental losses (negative gearing) in the equation. That means if you have investment properties that run at a loss for tax purposes, you can’t use that loss to reduce your HECS repayment obligation – the ATO adds it back. From a lender’s perspective, they’ll look at your taxable income and add back losses for serviceability too. So either way, you can’t “game” the HECS system by having rental losses to lower your income; the required HECS payment will still reflect your true gross income. As an investor, you might have higher income (so a higher HECS percentage) but also potentially more surplus income. Lenders will apply the same serviceability rules. One thing to be mindful of: if you’re at a stage where your HECS is almost paid off and you have investment income, a lender might see that soon your cashflow will free up (no more HECS). But otherwise, there’s no special treatment – HECS is a personal debt and gets treated as such whether the loan you seek is for a home to live in or an investment property. The good news: none of the first-home buyer grants or schemes are affected by HECS debt either – you’re still eligible for things like First Home Owner Grant or Home Guarantee schemes if you have HECS (they don’t even ask about it for those). So investors and home buyers both just contend with the same HECS servicing inclusion.

Q: How can I check my HECS debt balance and repayment rate?
A: To check your HECS-HELP debt balance, the simplest way is to log into your MyGov account and go to the ATO services section. There you can see your current HELP debt, any indexation added, and any repayments credited (note that repayments are usually credited after the ATO processes your tax return each year, plus any voluntary payments you made). You can also see your repayment threshold and rate for the current year. Alternatively, you can call the ATO HELP debt line (13 28 61) or check through the ATO’s online “loan balance” tool. The ATO website also lists the repayment income thresholds and rates for each financial year. For 2024–2025, for example, the threshold for any repayment is $54,435 of income, at which point 1% kicks in, and it scales up to 10% for incomes $164,713 and above. If you want to project future repayments, the ATO provides a HELP repayment calculator – you input your expected income and it will tell you the percentage and amount you’d repay. This can be useful when planning your budget for a home loan: e.g. if you expect a raise next year that moves you from 2% to 5% bracket, you can anticipate that change. Keeping track of your HECS balance is also good so you know if you’re close to finishing (in which case maybe that’s the time to throw an extra payment at it or just know that soon your pay will bump up after it’s cleared). Being informed about your HECS status will help you make decisions like voluntary payments or understanding how much longer you’ll be repaying.

Q: Is it true that HECS debt can be wiped or forgiven after a certain period or if I move overseas?
A: No, that is a myth. In Australia, a HECS-HELP debt does not get “wiped” after a set time. It persists until you pay it off or you die (at which point any remaining HELP debt is forgiven and not passed to your estate). There used to be anecdotes or misunderstandings, especially about going overseas – some thought if you lived overseas for 5+ years your HECS would be cancelled. That is not the case under current law. Several years ago, the rules changed so that even if you move overseas, if you’re earning above the threshold (worldwide income), you are required to make HECS repayments just as you would if in Australia. You have to file an overseas travel notification and report income to the ATO for this purpose. So there’s no escape hatch like moving abroad to have it written off; those days (if they ever truly existed) are over. The only broad forgiveness on the table is the government’s proposed one-time 20% reduction for all HELP debts as discussed. That’s a policy choice and hopefully will occur, but beyond that, you are generally expected to pay your HECS in full over time. That being said, HECS also doesn’t compound interest, so it’s not like it grows unbounded – it just keeps pace with inflation. But don’t count on it disappearing unless you pay it or the government enacts a special waiver. For your home loan planning, assume your HECS will be with you and plan accordingly (and if a policy winds up reducing it, that’s a pleasant bonus).

Q: Will a HECS debt affect my eligibility for first-home buyer grants or schemes?
A: No, having a HECS-HELP debt does not directly affect your eligibility for home buyer grants or assistance schemes. These programs (like the First Home Owner Grant, First Home Guarantee, stamp duty concessions, etc.) have criteria based on property ownership history, income (in some cases), property value, but none of them disqualify you for having a student debt. For example, the First Home Guarantee (formerly First Home Loan Deposit Scheme) looks at your income to ensure you’re under the cap, but it doesn’t factor in debts. Many participants in these schemes undoubtedly have HECS debts – it’s not considered a negative factor. The only indirect way it could matter is if your HECS repayment is making your income effectively lower, you might qualify for something like a low-income assistance or a particular scheme if you just meet the criteria. But generally, HECS won’t stop you from getting a grant. So don’t hesitate to apply for any first-home buyer assistance you’re entitled to just because you have HECS. In fact, those schemes can make it easier to buy with a smaller deposit, which might be helpful if HECS has slightly reduced how much you could save (though if you followed our strategies, hopefully you’re saving strongly despite HECS!). Always check the latest guidelines of the specific program, but rest assured a student loan isn’t going to void your eligibility.

Q: What’s going to happen to HECS-HELP debts in the future? (E.g., “I heard the government is reducing all HECS debts by 20%?”)
A: Big changes are indeed on the horizon. As of mid-2025, the government has introduced legislation to cut every HELP debt by 20% as a one-time measure. If passed, this will automatically reduce outstanding HECS-HELP balances (and other student loans) by one-fifth, possibly within the next year. This proposal is part of a larger effort to make student debt more manageable. Additionally, they plan to increase the minimum income threshold for repayments to $67,000 (from ~$56k indexed, or $54k prior to indexation), meaning many people won’t have to start repaying until they earn a decent full-time salary. They’re also adjusting repayment rates to be lower for many brackets. Furthermore, indexation of HELP debts will be capped so it can’t exceed wage growth, which will prevent the kind of high indexation we saw in 2023 from happening again. These changes haven’t all taken effect yet at the time of writing, but they are expected to in the coming years (some parts might require legislation to pass, which looks likely given support and the fact it was an election promise). For you, this means the burden of HECS debt should lessen going forward. You might wake up one day to find your debt 20% lighter – which could even immediately improve your borrowing capacity or take a year or two off your remaining repayment schedule. And if you’re a lower-income earner, you might get a temporary reprieve from making payments once the threshold jumps (giving you room in your budget perhaps to save more for a deposit). Keep an eye on official announcements from ATO or the Department of Education – they will inform all loan holders of changes that affect balances or repayments. It’s a bit of rare good news for debtors: the trend is that HECS debts will become less of a drag than they used to be, thanks to these reforms. Of course, always verify when changes go live. But it does seem the government recognizes that easing student debt helps young people get into housing and is acting on that.

Summary

A HECS-HELP debt is just one piece of your financial puzzle. It does mean a portion of your income is pre-committed, but it’s a manageable and common debt that lenders account for every day. With recent shifts in policies, it’s becoming even easier to navigate. Open communication and preparation are key – disclose your HECS, use the strategies to strengthen your situation, and perhaps consult a mortgage broker who can find the most HECS-friendly lender for you. Remember, your education debt helped get you to where you are in your career; with prudent planning, it won’t stand in the way of your property aspirations. Happy home hunting!