How HECS-HELP debt affects your borrowing power (and what’s changing).

If you’ve got a HECS-HELP debt and you're planning to buy a home, you might be wondering how it impacts your borrowing capacity. The good news? Recent changes to HECS-HELP repayments and indexation could make it easier to qualify for a home loan.

Thinking about buying your first home? Understanding how your student debt affects your loan application is key to borrowing smarter.

What’s new with HECS-HELP?

The federal government has introduced several changes to ease the pressure on student loan holders:

• 20% automatic reductionon outstanding HECS-HELP balances, backdated to June 1, 2025.
• Higher repayment threshold: You now need to earn $67,000 or more before making compulsory repayments (up from $54,435).
• Marginal repayment system: Repayments are now calculated only on income above the threshold, meaning lower repayments for most borrowers.

These updates mean less money going toward HECS each year, which can improve your borrowing capacity when applying for a home loan.

How HECS-HELP impacts your loan application

Lenders consider your HECS-HELP debt when assessing your ability to repay a mortgage. Even though it’s often seen as “good debt,” it still affects:

• Your disposable income
• Your debt-to-income ratio
• Your overall borrowing power

With the new changes, some borrowers could see their borrowing capacity increase by $30,000 to $60,000, depending on income and loan terms.

Should you pay off HECS before applying for a loan?

It depends. With the 20% discount and lower repayment rates, paying off HECS early may no longer be the best move. Instead, focus on:

• Saving for your deposit
• Reducing high-interest debts
• Improving your credit score

HECS-HELP debt doesn’t have to be a dealbreaker when buying a home. With recent policy changes, it’s now less of a burden on your borrowing power. The key is knowing how it fits into your financial picture and planning accordingly.

Want to know how your HECS debt affects your home loan options? Speak to a FinancePath mortgage expert today for personalised advice.