Having a HECS-HELP debt from a university can impact your borrowing capacity. HECS-HELP is a loan provided by the Australian Government that assists in covering the student contribution amount.

That’s because HECS repayments reduce your Net Disposable Income (NDI), which lenders use to calculate how much you can afford to borrow. As a result, the home you have your eye on might end up just out of reach.

Another issue is that student debt works differently from regular debts such as a car or personal loans. The outstanding balance doesn’t attract interest, though it is indexed yearly (typically upwards) in line with inflation or wage growth[i].

Moreover, repayments on a HECS-HELP debt only begin when a person earns over $54,435, and even then, the repayments start at just 1% of the debt annually[ii].

To understand the impact on borrowing power, lender Uno calculated that a taxpayer earning a gross annual income of $80,000, including super and with a deposit of $50,000, could potentially borrow between $437,000 and $618,000 without a HECS debt. However, if the same taxpayer had a HECS/HELP debt, they would need to make 3% repayments, which would cause their borrowing power to be between $413,400 and $601,000. This represents a decrease of around $17,000 to $23,600, depending on the lender’s criteria[iii].

Now for some good news. Federal Treasurer Jim Chalmers[iv] recently called on bank regulator APRA to relax the lending rules to help make it easier for home buyers with outstanding HECS debts to secure a mortgage. It’s an initiative that can potentially affect the 3 million Australians with a student (HECS-HELP) debt[v].

APRA is consulting on changes to how banks handle HELP debt repayments in home loan applications[vi].

If you have a HECS/HELP debt from university, speak with Our Broker today at 1800 913 677 to explore your strategies for getting into a home loan. 

[i] https://www.education.gov.au/helpestimator/faqs-help-indexation-credit#:~:text=Indexation%20is%20applied%20to%20HELP,at%20the%20rate%20of%204.7%25.

[ii] https://www.studyassist.gov.au/managing-and-repaying-your-loan/loan-repayments

[iii] https://www.unohomeloans.com.au/articles/hecs-help-home-loan-impact#:~:text=If%20you're%20wondering%20if,borrow%20by%20thousands%20of%20dollars.

[iv] https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/commonsense-changes-help-more-australians-home

[v] https://www.pm.gov.au/media/why-3-billion-hecs-wipe-will-make-real-difference

[vi] https://www.apra.gov.au/news-and-publications/apra-proposes-updated-approach-to-treatment-of-help-debts