From 31 July, NAB will disregard student debts when assessing home loan applicants if the outstanding amount is $20,000 or less.
Beneficiaries could see the amount they can borrow increase, with their income no longer assessed including compulsory student loan deductions.
NAB Executive for Home Ownership Matt Dawson says the change will allow more people to buy a home sooner than they otherwise would have.
"For too long HELP debt has been a roadblock for many Australians looking to buy a home," he said.
NAB is the second of the big four to relax how student loans are assessed after Commonwealth Bank announced earlier in the year it will no longer consider a borrowers student debt if it is due to be fully repaid within a year.
CommBank also now removes 2% from the home loan serviceability buffer when assessing applicants due to pay their student debt off within five years.
Other lenders to follow?
Lenders already assess HELP debt differently to a normal outstanding loan because the repayments are contingent on income.
Per ASIC, lenders may use discretion in assessing an applicants student debt, and are allowed to deem it appropriate to disregard when calculating a customers outgoings.
Treasurer Jim Chalmers called earlier in the year for lenders to take a "common sense" approach to student debts, so there could be more lenders following the example of CBA and NAB.
For borrowers with student debt this would be a timely development given APRA has once again ruled serviceability restrictions will not be eased.
It was announced yesterday the serviceability buffer will remain at 3% despite calls from the banking industry for it to be lowered.
Albo to forgive some outstanding student debts?
It could be set to be a great year for Australians with student debt, with Prime Minister Anthony Albanese's Government announcing on Wednesday it will be tabling legislation to wipe 20% off all outstanding student debts.
The Government says this will eliminate more than $16 billion worth of debt for over three million Australians.
Someone that owes $30,000 would have $6,000 wiped off the debt.
The legislation would also raise the income thresholds for compulsory repayments, increasing the minimum salary from $54,435 to $67,000 and reducing the minimum repayment amount.
"We promised cutting student debt would be the first thing we did back in Parliament - and that's exactly what we're doing," Mr Albanese said.
It would mean an Aussie with $25,000 currently outstanding on their student debt might soon be able to apply for a home loan with NAB without any of it taken into consideration.
Picture by Pang Yuhao on Unsplash
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