How does HECS-HELP debt affect my home loan borrowing capacity?
HECS-HELP debt is income-contingent and indexed, not a typical loan — how it's actually weighed in a home loan borrowing capacity assessment.
How does HECS-HELP debt affect my home loan borrowing capacity?
A HECS-HELP balance is one of the debts a lender will ask about when working out how much you can borrow — but it isn’t a normal loan, and it doesn’t behave like one in your finances. It’s a real commitment a lender factors into its assessment, but how much weight any individual lender gives it is that lender’s own policy, and policies vary between institutions. What sets HECS-HELP apart is worth understanding before you assume it works the same way a car loan or a credit card does.
What is HECS-HELP, and how is it different from other debt?
HECS-HELP is the loan scheme that covers tuition costs for most Commonwealth-supported university students in Australia. Unlike a bank loan, it isn’t owed to a private lender — it’s owed to the Commonwealth, and it’s collected through the tax system rather than by direct debit or a separate bill.
Two features set it apart from ordinary consumer debt:
- Repayments are income-contingent. There’s no fixed monthly instalment regardless of what you earn. As at July 2026, a compulsory repayment only applies once your repayment income passes the ATO’s threshold for the 2026–27 financial year — $69,528. Above that, the rate scales up through several income bands: 15 cents for each dollar over $69,528, rising to 17 cents for each dollar over $129,717, up to 10% of total repayment income once it passes $186,050.
- The balance is indexed, not interest-bearing. HECS-HELP doesn’t charge interest the way a personal loan or credit card does. Instead, the ATO applies indexation once a year, on 1 June, to whatever part of the balance has been unpaid for more than 11 months — using whichever is lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI) movement. The rate applied on 1 June 2026 was 2.8%.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
A debt that isn’t owed to a bank, doesn’t charge interest, and only demands repayment once you’re earning above a set level is genuinely different from the credit products a serviceability assessment usually deals with. That’s worth establishing before assuming a HECS-HELP balance sits on a lender’s books the way any other liability does.
Do lenders factor HECS-HELP into a home loan assessment?
Yes. Under ASIC’s responsible lending guide (RG 209), a lender must make reasonable inquiries into a borrower’s existing financial obligations, and take reasonable steps to verify them, before assessing whether the borrower can meet a new loan’s repayments without substantial hardship. A HECS-HELP balance is one of the obligations that inquiry is likely to cover — RG 209 was itself updated in March 2025 to add specific guidance for lenders on HELP debts (RG 209.68–69), reflecting how common this kind of debt now is among home loan applicants.
Our guide to how banks calculate borrowing capacity covers the full assessment framework — income, expenses, other debts and the interest rate buffer — in more detail; this article focuses on what’s specific to HECS-HELP within it.
As at July 2026, APRA’s prudential guidance (APG 223), which relays the binding standard APS 220, also directs lenders to apply a serviceability buffer of at least 3.0 percentage points across both the loan being applied for and a borrower’s existing debt commitments. A HECS-HELP repayment obligation sits among those existing commitments, even though — unlike a mortgage or a car loan — the debt itself doesn’t carry an interest rate for that buffer to apply to. What actually gets stress-tested is the repayment obligation as a call on your income, not the HECS-HELP balance as a rate product.
HECS-HELP vs a personal loan or credit card — the practical differences
| HECS-HELP | Personal loan / credit card | |
|---|---|---|
| Owed to | The Commonwealth (via the ATO) | A bank or lender |
| Repayment trigger | Compulsory only above an income threshold | Fixed instalment, regardless of income |
| Cost of carrying the balance | Periodic indexation, not interest | Interest charged on the outstanding balance |
| Can you choose the amount? | Extra voluntary repayments allowed; compulsory amount is income-based | Generally a fixed minimum set by the lender |
This table is a structural summary, not a substitute for checking your own figures — the income threshold, indexation rate and repayment schedule above are the ATO’s published figures as at July 2026 (2026–27 financial year) and are set by the ATO each year, so it’s worth checking ato.gov.au for the current numbers before relying on them for your own situation.
Does having a HECS-HELP debt reduce how much I can borrow?
It’s genuinely one of the inputs a lender weighs, but this article can’t tell you by how much — and nor can any general guide. Exactly how a lender treats a HECS-HELP repayment obligation in its serviceability calculation is that lender’s own policy, and it isn’t published as a uniform formula. That’s true of existing debts generally in a serviceability assessment, and it’s covered at the framework level in our guide to how banks calculate borrowing capacity.
If you’re still building toward a deposit while carrying a HECS-HELP balance, our guide to how much deposit you need for a first home in Australia covers the deposit side separately — a HECS-HELP debt is assessed as part of borrowing capacity, not as part of the deposit itself.
Should I pay down my HECS-HELP debt before applying for a home loan?
That’s a judgement call this article won’t make for you. Making extra voluntary repayments reduces the balance but uses cash that could otherwise sit in savings or go toward deposit and settlement costs; leaving the balance in place preserves that cash but keeps the compulsory repayment as an ongoing commitment a lender will see. Which matters more depends on your income, your timeline to buy, and how a specific lender treats the debt — none of which a general article can settle for you.
A mortgage broker who works across multiple lenders, or a registered tax agent for the tax-return side of your repayments, can model your actual numbers against actual lender policies. That’s a better basis for the decision than a rule of thumb.
Related read: our guide on how much you could borrow on a $100,000 salary walks through the other inputs — income, expenses, and existing commitments generally — that sit alongside a HECS-HELP balance in the same assessment.
