There are a lot of people with a lot of Higher Education Loan Program (HELP) and Higher Education Contribution Scheme (HECS) debt in Australia.
According to the Australian Tax Office (ATO), there were roughly 2.93 million people with outstanding HELP debts in the 2023-24 financial year - totalling more than $81.4 billion.
The good news is that the federal government is wiping 20% from all students loans which should take effect by the end of 2025.
It's also made moves to urge lenders to make it easier for would-be homebuyers carrying student debt to access home loans. Let's check the lay of the land.
What is HELP debt?
HELP is a government subsidised loan program, encompassing HECS and other costs incurred from attending university and higher education institutions. To take advantage of the program you need to be either an Australian citizen, a New Zealand Special Category Visa (SCV) holder, or a permanent humanitarian visa holder. You also need to have a Tax File Number (TFN) and be enrolled in your courses by your institutes' census date.
You don't have to pay off your HELP debt until you hit a certain threshold, $67,000 at the time of writing, and the more you earn, the greater the sum repaid. You can see the repayment schedule in the table below.
Repayment thresholds and rates 2025-26
Repayment income (RI) | Repayment amount |
|---|---|
0-$67,000 | Nil |
$67,001-$125,000 | 15c for each $1 over $67,000 |
$125,001-$179,285 | $8,700 plus 17c for each $1 over $125,000 |
$179,285 and over | 10% of total repayment income |
Source: ATO
Prior to the changes in 2025-26, HELP debts had been repaid as a flat percentage of income.
Does HELP debt affect home loan borrowing power?
HELP debt, just like any other debt, does have some effect on your borrowing power but it's unlikely to disqualify you from taking out a home loan outright.
Borrowing power is the amount of money a lender will let you borrow to purchase a property. Using Savings.com.au's borrowing power calculator can give you a rough idea of the effect HELP debt may have on your borrowing power.
Bear in mind, all lenders have different policies although most will likely treat student debt a little differently to general debt.
Why is student debt different to other debt?
For a start, HELP debt repayment depends on your income. You don't need to make any repayments unless you're earning above a certain threshold and you also don't pay interest on student debt as you would on other debts.
Rather, student debt is indexed annually on 1 June in line with changes to either the Consumer Price Index (CPI, which measures inflation) or the Wage-Price Index (WPI, the price of wages and salaries) - whichever is lower.
In that way, the loan keeps pace with 'real value' but it does not accrue interest in the usual sense.
Should I pay off more of my HELP debt to improve my borrowing power?
Because student debt is considered 'cheaper' than other debt, it's often recommended you pay off other debts before paying down your HELP debt.
Other 'traditional' debts are likely to have higher interest rates than both HELP index rates, so paying these off first can effectively save you money on interest costs.
What are the changes to how lenders calculate student debt?
In recent times, several major lenders have announced they have eased their policies on how they regard student debt in their home loan assessment criteria.
It follows federal Treasurer Jim Chalmers urging regulators to allow lenders to exclude student debt from loan serviceability calculations.
Here is how some of the major lenders have responded:
Commonwealth Bank
- does not count student debt in home loan assessments if it's due to be paid off in a year
- "piloting" dropping the serviceability buffer to 1% (from 3% at the time of writing) for those due to pay off their student debt within five years
See also: CBA eases HECS home loan restrictions
See also: What is home loan serviceability and how is it calculated?
National Australia Bank
- disregards student debt if the amount is less than $20,000
See also: NAB to change how HELP debt is assessed for borrowers
General guidelines for banks
The banking regulator, Australian Prudential Regulation Authority (APRA), has made changes to its guidelines, clarifying how lenders should consider HELP debt. The changes allow lenders greater flexibility in taking individual circumstances into account.
Non-bank lenders
The regulator for non-bank lenders, Australian Securities and Investment Commission (ASIC), has instructed lenders under its watch:
- They may use discretion in assessing an applicant's student debt
It pays to shop around
While restrictions around student debt on home lending may be easing, individual lenders will have their own policies. If you have a HELP debt, it can pay to ask prospective lenders how they will regard your student loan to ascertain whether it may affect your borrowing power and your home loan goals.
The table below features some of the most competitive owner occupier interest rates on the market and may be a good place to start:
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 5.95% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
How to improve your borrowing power
If you're looking to improve your overall borrowing power, here are some tips that may boost it:
Set up a budget
Creating a budget can improve your borrowing power in several ways. A budget can give you a better idea of your finances, your incomings and outgoings, and help you to improve your financial behaviour.
Lenders like to see a history of good financial behaviour, often trawling back six months and more to see how you have managed your money. If the lender likes what it sees, your chances of approval should improve, while also improving your borrowing power.
Cut back expenses
Cutting back on expenses is an obvious way to save money while also hiking your borrowing power at the same time. Non-discretionary expenses like rent, insurance, and car registration are typically difficult to cut back on, but discretionary spend such as entertainment, subscription services, and spending on clothes are all things that can easily be pulled back if you're looking to borrow.
Pay down debts
Having outstanding car loans, personal loans, credit card debt, and buy now, pay later debt can drastically reduce your borrowing power. Paying these down, as well as making compulsory payments on time, ideally in full, can all improve your image from a lender's point of view.
Reduce credit limits and cancel cards
A large credit limit on an active credit card, even if you don't have any debt on it, can be a red flag for a lender. Reducing your limit from $30,000 to $10,000 can be an easy way to improve your borrowing power while cancelling the card all together is even better.
Avoid buy now, pay later and payday loans
Buy now, pay later and payday loans are considered forms of credit and are viewed unfavourably by lenders. Payday loans are in many cases also fraught with danger, sporting extortionate fees and interest rates. Avoid these products where possible.
Increase your income
Far easier said than done, but increasing your income, in turn, increases your borrowing power. You can ask your current employer for a raise or look for alternative ways to increase your income through a side hustle.