The Impact HECS–HELP Debt has on your Home Loan

Sydney, 14 May 2025 — For many Australians, the Higher Education Contribution Scheme (HECS–HELP) has made tertiary education more accessible. But while the scheme eases the financial burden of university fees, it can quietly influence another major life milestone: buying a home.

Unlike traditional loans, HECS–HELP repayments are income-contingent, meaning they only kick in once a graduate earns above a certain threshold. This feature makes the debt feel less immediate, but experts warn that it still plays a significant role in home loan assessments.

How HECS–HELP Affects Borrowing Power

Although HECS–HELP debt doesn’t appear on credit reports and doesn’t accrue interest in the traditional sense, lenders still treat it as a financial obligation. When assessing a borrower’s capacity, banks factor in HECS–HELP repayments as part of regular expenses, which can reduce the amount a person is eligible to borrow.

Many first-time buyers are surprised to learn that their HECS–HELP debt can limit their borrowing power. It’s not just about how much you owe, but how much of your income is tied up in repayments.

Key Factors That Influence the Impact

Several variables determine how significantly HECS–HELP debt affects a loan application:

• Income Level: Higher earnings trigger larger compulsory repayments, reducing disposable income.

• Debt Size: Larger HECS–HELP balances lead to higher deductions once the income threshold is crossed.

• Lender Policies: Some lenders are more lenient than others when it comes to HECS–HELP debt.

Strategies to Improve Loan Eligibility

Despite the challenges, financial experts say there are ways to mitigate the impact of HECS–HELP on home loan applications:

• Increase Income: Advancing your career or taking on additional work can offset repayment obligations.

• Make Voluntary Repayments: Reducing your HECS–HELP balance can lower your repayment rate.

• Choose the Right Lender: Mortgage brokers can help identify lenders with more favourable policies.

• Budget Wisely: Cutting unnecessary expenses and paying off other debts can strengthen your financial profile.

Should You Pay Off HECS–HELP Before Applying?

The decision to pay off HECS–HELP debt before applying for a mortgage depends on individual circumstances. While doing so can improve borrowing capacity, it may not always be the best move.

Advice for First-Time Buyers

For those navigating the property market with HECS–HELP debt, preparation is key. Experts recommend:

• Tracking income and expenses closely

• Prioritising high-interest debt repayments

• Strengthening credit profiles

• Seeking professional advice

With the right strategy, HECS–HELP debt doesn’t have to be a roadblock to homeownership. Instead, it’s one of many factors to consider in a well-rounded financial plan.