Major Changes to HECS Debt Treatment for Home Loans

The federal government is making it easier for Australians with student debt to secure home loans by instructing financial regulators to update their guidance on HELP debt assessment.

Federal Treasurer Jim Chalmers has directed both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to revise how Higher Education Loan Program (HELP) debts are treated during mortgage applications. 

The changes aim to remove barriers for first-home buyers whose serviceability is currently reduced by student debt obligations.

Under current responsible lending rules, lenders must assess student debt in the same manner as other debts like credit cards or personal loans, despite the unique nature of HELP repayments which are only required when income exceeds certain thresholds.

“People with a HELP debt should be treated fairly when they want to buy a house, and we’re working with the regulators to make sure they are,” Mr Chalmers said.

ASIC has committed to quickly implementing changes to its guidance after consultation. The Treasury has confirmed that APRA will begin consultation on revising serviceability requirements and debt reporting related to HELP debts. 

“APRA expects an ADI [Authorised Deposit-taking Institution] to consider a borrower’s HELP debt obligations alongside other debt commitments when assessing their borrowing capacity,” APRA said.

“This is because HELP repayments are deducted from gross income and are not available to service a mortgage. However, APRA considers it is reasonable for ADIs to take into account the individual circumstances of the borrower and the nature of their HELP debts.”

“In that case, APRA expects this to be determined by an ADI in accordance with their lending policies, risk appetite, and after considering the individual circumstances of a borrower.”

According to the updated guide, an ADI may consider it reasonable to remove HELP repayments from a serviceability assessment where a borrower is expected to pay off their HELP debt within 12 months.

“This loan serviceability override would be on the basis that the ADI considers the borrower will be largely unaffected by HELP repayments over the remaining term of their mortgage considering the near-term repayment of, and income-contingent nature of, outstanding HELP debt. APRA expects ADIs to have prudent frameworks for dealing with overrides including relating to HELP debts,” APRA said.

Industry groups have welcomed the announcement, with the Mortgage and Finance Association of Australia (MFAA) saying that this issue has been a significant concern among mortgage brokers. While the Australian Banking Association (ABA) also expressed support for the decision. 

As such, since 30 September 2025, lenders no longer need to factor in HELP debt when assessing mortgage serviceability – if the debt is expected to be repaid within 12 months – removing a key hurdle for many first-home buyers.

*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.