Does HECS Debt Affect Home Loan Borrowing Power?

Yes, a HECS-HELP (HELP) debt can reduce your borrowing power, mainly because the compulsory repayment reduces the income you have available to service a home loan. How much it matters depends on your income, your balance and the lender, since policies differ.

This is general information only, not financial or credit advice. Repayment rules are updated each year, so check the Australian Taxation Office (ATO) and your lender for current details.

How HELP repayments work now

HELP debts are repaid through the tax system. According to Study Assist, the ATO works out whether you owe a compulsory repayment after you lodge your tax return, and your employer may withhold amounts from your pay in the meantime. Voluntary repayments can be made at any time and do not reduce what you are required to pay.

The system changed from the 2025-26 income year. The ATO says compulsory repayments are now calculated only on the income above the minimum repayment threshold, instead of on your total repayment income. If you have read older descriptions of stepped percentages applied to your whole income, they no longer reflect how it works.

The ATO’s repayment thresholds and rates page sets out the figures. For 2026-27, there is no repayment up to $69,528 of repayment income, then 15 cents for each dollar over $69,528 up to $129,717, with higher rates above that. The ATO says these thresholds are indexed each year. Repayment income is wider than salary: it includes taxable income, reportable fringe benefits, net investment losses and reportable super contributions, among other things.

How lenders treat a HELP debt

There is no single rule. Lenders set their own policies, and I would not assume yours matches anyone else’s. The common thread, in my experience, is that the compulsory repayment matters more than the balance itself. NAB’s published guidance is one example: it says compulsory repayments reduce your net usable income, and it counts the debt toward your debt-to-income ratio. It also says that a student debt of $20,000 or less will not affect how much it will lend, and that some lenders may ignore repayments when you are close to paying the debt off. Another lender may use different cut-offs or none at all, so ask yours.

The effect is also not uniform. If your income is below the repayment threshold, there may be no compulsory repayment to count. If your income is high, the repayment is larger and the effect on serviceability is bigger.

An illustrative calculation

Illustrative only: this uses a made-up income and treats taxable income as the whole of repayment income, which will not be true for everyone.

• Repayment income: $92,000.
• 2026-27 threshold: $69,528, so income over the threshold is 92,000 – 69,528 = $22,472.
• Compulsory repayment: 22,472 x 15% = $3,370.80 a year, or about $281 a month.

A lender that deducts that repayment from your income treats about $281 a month as unavailable for a mortgage. That reduces the amount you could borrow, though by how much depends on the lender’s assessment rate and buffer, which I have not tried to model here.

Should you pay the debt off before applying?

It depends. Paying it off removes the repayment from the assessment, but it also uses cash you might need for your deposit and upfront costs. NAB’s guidance describes it as having no universal answer and notes that higher-interest debts such as credit cards and car loans usually reduce borrowing power more. Another point is indexation: Study Assist says HELP debts are indexed each year, and that paying before 1 June means indexation is calculated on the lower balance.

What to do next

• Check your current HELP balance in myGov through the ATO, and your expected repayment for this year.
• Work out your repayment income, not just your salary, using the ATO’s definition.
• Ask your lender or broker how they treat HELP repayments in serviceability and whether any balance threshold applies.
• Compare using spare cash to clear the debt against keeping it as a larger deposit, and consider clearing other debts first.
• Run the borrowing figures both with and without the debt before you decide.

Related Reading

• Home Lending & Property Glossary
• Riverina Property: Why Regional Serviceability Rules Catch Buyers Out
• Should You Refinance? The Simple Maths That Actually Answers It

Written by Michael Wignall, who’s spent 30+ years in banking and home lending across the ACT, Illawarra, and Riverina regions of NSW.

More on this topic is collected in the Finance Strategies for Australians hub.

Related reading:

• Does a Car Loan Affect Your Home Loan Borrowing Power?
• Home Loan After Redundancy or on Probation: Can You?

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Written by Michael Wignall, Lending Area Manager with 30+ years in banking and home lending across the ACT, Illawarra, and Riverina. Got a question or an idea for a post? Get in touch.