HECS Debt and Home Loans: How Australian Lenders Assess Student Debt

HECS Debt and Home Loans: How Lenders Assess HELP Debt

Can you get a home loan with HECS debt? Learn how Australian lenders assess HELP, HECS and study-loan repayments when calculating borrowing power.

Having a HECS or HELP debt does not automatically stop you from getting a home loan.

In fact, many Australians buy property while still carrying study debt. The issue is usually not the balance itself. The issue is how lenders calculate the ongoing repayment and how that repayment affects your borrowing power.

That detail matters because lender policy is not identical. Some lenders calculate HECS or HELP repayments automatically inside their servicing calculator. Some rely on the ATO repayment rates. Some may allow the debt to be excluded if it is being fully repaid soon. Others treat the repayment as a fixed monthly commitment that must be included in the home loan assessment.

This guide explains how HECS, HELP and other study-loan debts can affect your home loan application, based on current lender policy data.

What counts as a study-loan debt?

When people say “HECS debt”, they are usually talking about a government study or training loan.

Depending on your circumstances, this may include:

• HECS-HELP
• HELP
• VET Student Loans
• Student Financial Supplement Scheme
• Student Start-up Loans
• ABSTUDY Student Start-up Loans
• Trade Support Loans or Australian Apprenticeship Support Loans

Most lenders treat these under the broader category of study and training support loans.

The repayment is usually assessed through the tax system, which means your required repayment depends on your income rather than the size of the debt alone.

Does HECS debt affect your home loan application?

Yes, it can.

A HECS or HELP debt can reduce your borrowing power because lenders generally include the required repayment when assessing whether you can afford the proposed loan.

That does not mean the lender treats HECS like a credit card or personal loan. It usually does not have a normal interest rate, monthly repayment contract or fixed loan term. But for servicing, lenders still need to account for the repayment if your income is high enough to trigger one.

A borrower earning $75,000 may have a different HECS repayment from a borrower earning $130,000. That difference can change how much each person can borrow, even if their study-loan balance is similar.

Why the balance is not always the main issue

With most debts, the loan balance matters because it influences the repayment.

HECS and HELP are different. The compulsory repayment is generally based on repayment income. A borrower with a $12,000 study debt and a borrower with a $60,000 study debt may have the same compulsory repayment if their incomes are the same.

This is why paying down part of your HECS debt may not always improve your borrowing power.

For home loan purposes, the bigger question is often:

What repayment will the lender use?

If you are going to repay the debt in full before settlement, or if the remaining balance is low enough to be cleared soon, some lenders may treat the situation differently. But partial repayments can be less useful if they do not remove the required repayment from the servicing calculation.

How lenders calculate HECS repayments

Based on the lender policies reviewed, there are several common approaches.

1. The lender calculator works it out automatically

Some lenders calculate the HECS or HELP repayment inside their own servicing calculator.

In the reviewed dataset, lenders with clearer automatic-calculation treatment included examples such as CBA, Westpac, Bankwest, ING, St.George, UBank, MyState, People First Bank and ORDE Financial.

This can make the result more consistent because the lender’s calculator applies its own treatment to the declared income.

2. The repayment is calculated using ATO rates

Other lenders may use the ATO study-loan repayment framework to calculate the monthly commitment.

This is common where the lender’s calculator does not automatically calculate the repayment or where the broker needs to input the figure manually.

Examples from the reviewed policies include lenders such as ANZ, NAB, Suncorp Bank, La Trobe Financial, RedZed, Resimac, Firstmac, Newcastle Permanent and Pepper, although the exact process and calculator treatment can differ.

3. The repayment is treated as an expense or commitment

Some lenders require the HECS or HELP amount to be listed as an existing commitment or expense.

Macquarie, for example, treats visible HELP or HECS deductions on payslips as an involuntary expense item unless evidence confirms the debt has been paid out in full.

Gateway’s policy also refers to study and training loan repayments being included as commitments for capacity assessment.

4. The repayment may already be reflected in net income

Some lender policies recognise that if HECS has already been deducted from gross pay and net income is being used, the repayment may not need to be captured again in the same way.

ANZ’s policy, for example, notes that repayments do not need to be captured where they are deducted from gross pay and net income has been used for serviceability.

This is a technical point, but it matters. Double-counting a HECS repayment can make an application look weaker than it really is.

Can HECS debt be excluded from servicing?

Sometimes, but usually only with evidence.

Some lenders may allow HECS or HELP to be excluded where the debt has been fully repaid, is being paid out before settlement, or will be cleared within a short period.

Examples from the reviewed lender policies include:

Lender	Possible treatment
Macquarie	May exclude the associated payments if evidence confirms the HELP or HECS debt has been paid out in full.
ANZ	Requires evidence from myGov or ATO documentation if the debt has been repaid.
NAB	Has a process for considering exclusion in limited cases where the declared limit is $20,000 or below and servicing is not evident, with ATO portal evidence required.
Westpac	May allow an amended commitment position where the commitment can be verified as fully repaid within 12 months, subject to policy conditions.
St.George	Similar treatment to Westpac, with possible amendment where the commitment can be verified as fully repaid within 12 months.
Keystart	May allow the debt to be excluded from serviceability where it ends within 3 months from conditional approval and evidence is provided.
CBA	Has alternate servicing treatment references, with evidence and policy conditions applying.
ING	Assesses the higher of the declared repayment or the compulsory ATO-based repayment, with policy treatment depending on the repayment position.

This is why evidence matters. A lender will usually not ignore HECS simply because the balance is small or because the applicant plans to pay it off later.

Should you pay off HECS before applying for a home loan?

Sometimes it helps. Sometimes it does not.

Paying off HECS may improve your borrowing power if it removes the repayment from the lender’s servicing calculation. This can be useful where the balance is low and the repayment is meaningfully reducing your borrowing capacity.

But paying it off is not always the best move.

For example, if you use your savings to clear HECS, you may reduce your deposit. A lower deposit can increase your LVR, trigger lenders mortgage insurance, or push you outside a lender’s preferred policy settings.

A simple example:

• You have a $7,000 HECS balance.
• You also have a $90,000 deposit.
• Paying off HECS may improve your monthly servicing position.
• But it may reduce your deposit to $83,000.
• That could affect your LVR, loan options or LMI position.

The right answer depends on the numbers. A broker can compare both scenarios: keeping the HECS debt versus paying it out before application or settlement.

Why HECS debt can affect professionals more than expected

HECS and HELP debts are common among higher-income professionals.

Doctors, nurses, teachers, engineers, lawyers, accountants and allied health professionals may all have study debt while earning enough to trigger compulsory repayments.

That can create a slightly awkward lending scenario. The borrower may have strong income and stable employment, but the study-loan repayment can still reduce borrowing capacity.

This is especially relevant for:

• first-home buyers
• recent graduates
• medical professionals in training
• teachers and nurses with HELP debts
• borrowers using professional LMI waivers
• couples where both applicants have study debts
• borrowers close to their maximum borrowing limit

A HECS repayment is rarely the only factor in approval, but it can be the difference between passing and failing servicing where the application is tight.

How HECS affects joint home loan applications

If two applicants apply together, each person’s HECS or HELP position is assessed separately.

One borrower may have no study debt. The other may have a sizeable HELP balance and a compulsory repayment. The lender will usually include the relevant repayment for the borrower who has the debt.

This can matter for couples where one applicant earns a higher income and has a study loan. The repayment may be larger than expected because it is tied to income, not just the outstanding balance.

Before applying, it is worth checking:

• which applicant has the study debt
• the current balance
• the repayment showing on payslips
• whether the debt will be repaid soon
• whether the lender uses gross income, net income or calculator-derived treatment
• whether paying it out would improve the loan result

What documents might lenders ask for?

The evidence depends on the lender and the application.

You may need:

• recent payslips showing HECS or HELP deductions
• income statements
• ATO account information
• myGov evidence showing the current balance
• evidence that the debt has been paid in full
• evidence that the debt will be paid out before settlement
• details of any voluntary repayments

Where a lender is considering excluding the debt, the evidence usually needs to be current and clear. For example, NAB’s reviewed policy refers to ATO portal evidence showing the customer name, a redacted TFN, the date generated and the current outstanding balance.

Common mistakes borrowers make with HECS and home loans

Assuming HECS does not matter because it is “good debt”

HECS is different from credit-card debt, but lenders still need to assess the repayment where it applies.

Paying off part of the debt without checking the borrowing impact

A partial repayment may reduce the balance but still leave the compulsory repayment in place. If the servicing repayment does not change, the borrowing-power benefit may be limited.

Forgetting to disclose the debt

Lenders can usually identify study-loan deductions from payslips, tax information or the application process. It is better to disclose it properly upfront.

Comparing lenders using the wrong repayment figure

Some lender calculators automatically calculate HECS. Others may require the repayment to be manually entered. If the wrong figure is used, the borrowing estimate may be misleading.

Using deposit funds to clear HECS without checking LVR

Paying off HECS can help servicing, but weakening the deposit position can create a different problem.

Which lender is best if you have HECS debt?

There is no single best lender for every borrower with HECS or HELP debt.

The right lender depends on:

• your income
• your HECS or HELP balance
• whether the debt will be cleared soon
• your deposit sizeyour LVR
• your profession
• your other debts
• whether you are buying or refinancing
• whether the application passes servicing with the debt included

Some lenders may be more suitable where the debt is being paid out soon. Others may be more predictable because their calculator handles the repayment automatically. In a tight application, the way the lender calculates the repayment can materially change the result.

Can you still get approved with HECS debt?

Yes. Many borrowers with HECS or HELP debt still qualify for home loans.

The key is to model the application properly before submission. That means checking the actual lender policy, the repayment calculation, the deposit position and whether paying out the debt would improve or weaken the overall application.

If the loan is comfortably affordable, HECS may be a minor issue. If the application is close to the servicing limit, the lender choice and repayment treatment become much more important.

Need help working out your borrowing power with HECS debt?

HECS and HELP debt can be simple in theory but messy in a home loan calculator.

A broker can help compare lender options, test your borrowing power with and without the study debt, and work out whether paying it out would actually improve your position.

Before you apply, speak with a mortgage broker who understands how different lenders treat study-loan repayments.