Yes, HECS debt affects a home loan because lenders deduct compulsory repayments from the income available to repay the mortgage. A HECS debt reduction improves borrowing power when it clears the debt or brings it within a lender’s repayment exception.
HECS-HELP is part of the Higher Education Loan Program (HELP). A lower HELP balance alone usually leaves the income-based repayment unchanged. The separate repayment-threshold changes can reduce that commitment even when a substantial balance remains.
Does HECS Debt Affect a Home Loan?
Yes, the compulsory HELP repayment reduces the income a lender can count towards home loan repayments. The repayment normally depends on your income, so two borrowers with different HELP balances can face the same deduction.
The balance becomes more important when it is small enough to repay soon. Lender exceptions can then change the outcome. Having HELP debt does not automatically prevent you from getting a home loan.
An Illustrative Borrowing-Power Calculation
Assume a borrower has $100,000 annual repayment income in 2026-27 and a HELP balance large enough for the full annual repayment. Their compulsory repayment is 15% of the $30,472 above the threshold, or $4,570.80 a year. That is $380.90 a month.
For this simplified illustration, assume $3,000 monthly remains for mortgage repayments before HELP. Use a hypothetical 9% annual assessment rate, monthly repayments and a 30-year principal-and-interest term.
| Scenario | Monthly Amount Available | Illustrative Mortgage Capacity |
|---|---|---|
| HELP repayment included | $2,619.10 | About $325,500 |
| HELP debt cleared and repayment removed | $3,000 | About $372,800 |
| Difference | $380.90 | About $47,300 |
These figures isolate the repayment’s effect. They are not a lender quote or a complete credit assessment. Actual loan serviceability includes tax, other debts and household expenses, with each lender’s assessment rules.
HELP Debt Repayment Thresholds and Rates
The minimum HELP repayment income is $69,528 for 2026-27, compared with $67,000 for 2025-26. These are income years, not calendar years.
The ATO’s repayment income and rates give the following comparison. Each row pairs the corresponding band in the two income years.
| Band | 2026-27 Repayment Income | 2026-27 Annual Repayment | 2025-26 Repayment Income | 2025-26 Annual Repayment |
|---|---|---|---|---|
| Nil | $0 to $69,528 | Nil | $0 to $67,000 | Nil |
| First marginal band | $69,529 to $129,717 | 15c per $1 over $69,528 | $67,001 to $125,000 | 15c per $1 over $67,000 |
| Second marginal band | $129,718 to $186,050 | $9,028 plus 17c per $1 over $129,717 | $125,001 to $179,285 | $8,700 plus 17c per $1 over $125,000 |
| Whole-income cap | $186,051 and over | 10% of total repayment income | $179,286 and over | 10% of total repayment income |
The marginal system starts in 2025-26. Below the top band, the repayment applies to income above the relevant threshold. At the highest incomes, the table uses 10% of total repayment income.
Repayment income includes taxable income, excluding assessable First Home Super Saver released amounts. The ATO adds reportable fringe benefits, total net investment losses, reportable super contributions and exempt foreign employment income. Net rental losses are included in the investment-loss add-back.
A salary package can therefore produce a different HELP repayment from one calculated using taxable salary alone. Lenders also apply their own rules to the income they accept for a mortgage. A broker must reconcile those figures instead of assuming every salary-sacrificed dollar reduces the repayment.
Employers collect amounts through pay as you go (PAYG) withholding after the employee declares the study loan. The ATO calculates the final compulsory repayment when the tax return is assessed. Withholding during the year does not immediately reduce the HELP account balance.
The HECS Debt Reduction and Repayment Changes
Australia’s one-off HECS debt reduction cuts eligible student loan balances by 20%, and the ATO has completed processing it. Borrowers did not need to apply.
The reduction uses the eligible balance at the government’s specified 2025 cut-off, before that year’s indexation. It does not apply to every loan incurred throughout 2025. The ATO’s debt reduction explanation sets out the exact eligibility boundary.
For an illustrative eligible balance of $30,000 before indexation, the cut removes $6,000. The remaining principal is $24,000 before the adjusted indexation and subsequent account activity. A borrower sees the reduction and any indexation adjustment in their ATO loan account.
The ATO also recalculates the affected 2025 indexation against the reduced eligible debt. Indexation already appearing on a statement does not mean the borrower misses the reduction. Some accounts show several reduction transactions because different loans were added at different times.
The repayment changes act separately. In 2025-26, $100,000 repayment income produces a $4,950 compulsory repayment. The 2024-25 table charged 5.5% of total income at that income, or $5,500. The 2026-27 amount falls to $4,570.80 using the indexed threshold.
A smaller annual repayment leaves more income for the mortgage assessment and for household spending. It does not necessarily clear the study loan faster. Lower repayments can extend repayment time even after the balance reduction.
The Department of Education describes the 20% cut as a one-off measure. The enacted indexation cap uses the lower of the Consumer Price Index and Wage Price Index. Base a home loan application on the recorded balance and enacted repayment rules, without assuming another general debt cut.
How Lenders Treat HELP Debt in Serviceability
Lenders generally account for HELP through a deduction from assessed income or an ongoing repayment commitment. The compulsory amount at the borrower’s assessed income reduces the surplus available for the mortgage.
APRA’s APG 223 Residential Mortgage Lending allows lenders to consider the borrower’s individual circumstances. It describes an exception when the debt will clear “within 12 months through the compulsory repayments deducted from gross income”.
That is a discretionary serviceability override. APRA does not require every bank to exclude the repayment, and it leaves the decision to each bank’s lending policies and risk appetite. A broker must distinguish a lender that accepts an exception from one that continues to count the commitment.
For a hypothetical $3,000 balance and $4,570.80 annual compulsory repayment, the figures support asking for the near-term repayment exception. Evidence must show the actual balance and the expected repayment. Indexation or a new study loan can change the clearance estimate.
Compare eligible lenders before using deposit savings to clear the balance. If the selected lender already removes the repayment, a voluntary payment may add no borrowing power. If it requires full discharge, obtain the updated ATO record before lodging on that basis.
Keep serviceability separate from debt-to-income assessment. Removing a repayment from one calculation does not remove every other lending constraint. Household costs still enter the assessment through declared expenses and benchmarks such as the Household Expenditure Measure.
Checking HECS Debt and Your Credit Report
Check your HECS debt through your linked ATO account in myGov and use that balance in the loan application.
- Sign in to myGov and open the linked Australian Taxation Office service.
- Select Tax, then Accounts, then Loan accounts.
- Open the relevant HELP account and review its balance and transactions.
- Save the statement showing the reduction, repayments and any indexation adjustment for your broker.
The ATO’s loan-account instructions also explain access through the ATO app. The compulsory repayment appears on the income tax notice of assessment after the tax return is processed.
A normal HELP balance is held in the ATO loan account rather than listed as a consumer credit account on a credit report. The balance itself does not directly lower a credit score. It still affects the lender’s affordability assessment through the declared liability and repayment.
Experian explains that a credit report is only part of a lender’s assessment. Declare HELP even when the credit report shows no study loan. A mismatch between the application and ATO evidence can change the serviceability result and require the lender to reassess the application.
Repay HECS Early or Save a Deposit?
Clearing HELP can improve a home loan application when serviceability limits the loan and the lender will remove the repayment. Keeping the money can be better when the deposit or cash buffer limits the purchase.
A partial voluntary repayment usually leaves the income-based compulsory amount unchanged while a balance remains. It helps the mortgage calculation only if it changes the lender’s treatment, such as bringing the debt within an accepted exception.
Compare both versions of the same purchase before making an irreversible payment.
| Decision Factor | Clear the HELP Balance | Keep the Deposit Savings |
|---|---|---|
| Mortgage serviceability | Improves if the lender removes an assessed repayment | HELP deduction can continue unless an exception applies |
| Deposit | Cash available for the purchase falls | More cash remains for the purchase |
| Loan-to-value ratio | Can increase when a smaller deposit requires a larger mortgage | Can reduce the mortgage relative to the property value |
| Lenders mortgage insurance | A smaller deposit can trigger or increase the cost | A larger deposit can reduce the cost or avoid it |
| Cash buffer | Voluntary repayment uses money that cannot be withdrawn later | Cash remains available for settlement costs or emergencies |
Lenders mortgage insurance (LMI) protects the lender. An eligible first home buyer’s 5% deposit scheme position can also change the comparison.
StudyAssist explains that voluntary repayments are non-refundable. They are additional to compulsory repayments and do not ordinarily offset them.
Ask your broker to compare the maximum loan and cash required at settlement under both options. Keep the property price, lender assumptions and household expenses consistent. Repay the balance only when the improved assessment outweighs the deposit and buffer you give up.
