If you’ve got a HECS or HELP debt, you’ve probably heard the rumours: that student debt makes it harder to get a home loan, that you should pay it off before you apply, or that banks will reject you outright. Some of that was true a few years ago. In 2026, almost none of it is.
The rules have changed significantly. In August 2025, the Australian Government legislated a one-off 20% reduction across all HECS-HELP balances. From the 2025-26 financial year, the minimum repayment threshold has jumped to $67,000, and the way compulsory repayments are calculated has switched to a fairer marginal system. On top of that, APRA finalised new guidance in June 2025 that gives lenders flexibility to remove HELP debt from serviceability assessments in certain cases — a major change that took effect on 30 September 2025.
What does all this mean for you? In short: getting a home loan with HECS debt in 2026 is more achievable than it has been in years. But you still need to know how lenders assess your debt, how it affects your borrowing power, and which strategies actually work to maximise your approval amount.
This guide is the most up-to-date, expert-backed resource on HECS debt home loans in Australia for 2026. Written by our team of experienced mortgage brokers at Centria Finance, it walks you through everything from how banks treat HELP debt today, to which first home buyer schemes you can access, to practical strategies that can add tens of thousands of dollars to your borrowing capacity.
Let’s get you into your first home.
What Is HECS/HELP Debt?
Before we dive into mortgages, a quick refresher.
HECS-HELP (Higher Education Contribution Scheme — Higher Education Loan Program) is the Australian Government’s student loan scheme. It allows eligible students in Commonwealth Supported Places to defer their university tuition fees through a government loan that’s repaid through the tax system once their income reaches the threshold.
Key features of HECS/HELP debt in 2026:
- Indexed annually to CPI (3.2% in June 2025, much lower than the 7.1% peak in 2023)
- Repaid through the tax system — your employer withholds repayments via PAYG when you earn above the threshold
- Income-contingent — you only repay when you can afford to
- Doesn’t appear on your credit report — it doesn’t affect your credit score
- No interest charges — only indexation
- Forgiven on death — not passed to your estate
For more detail on how HECS-HELP works as a loan, the Australian Government’s StudyAssist HECS-HELP information page is the authoritative source.
The 2025 HECS-HELP Reforms
Two major changes happened in 2025 that every Australian with a HECS debt should know about:
- The 20% debt cut — On 2 August 2025, the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 became law. The ATO automatically applied a 20% reduction to all HECS-HELP balances as at 1 June 2025, before annual indexation was added. Around $16 billion in student debt was wiped across all affected borrowers, including VET Student Loans and Australian Apprenticeship Support Loans.
- New repayment threshold and marginal system — From the 2025-26 income year, the minimum repayment threshold rose from $54,435 to $67,000. Repayments are now calculated only on income above the threshold, not on your total income.
These changes mean most Australians are now repaying less HECS each year — and that has a direct, positive impact on home loan borrowing power.
Can You Get a Home Loan with HECS Debt?
Yes — absolutely. Having a HECS or HELP debt does not disqualify you from getting a mortgage in Australia. Thousands of Australians with student debt secure home loan approval every year, including first home buyers, young professionals, and couples buying together.
What HECS debt does affect is your borrowing capacity — the maximum amount a lender will approve you for. The size of the impact depends on:
- Your income level
- The size of your HECS debt
- How close you are to paying it off
- Which lender you apply with
- Whether you’re applying solo or jointly
The question isn’t “can I get a home loan with HECS?” — it’s “how do I maximise my borrowing power despite having a HECS debt?” That’s where a specialist mortgage broker becomes invaluable.
Want a quick assessment? Book a free borrowing power review with Centria Finance →
Can HECS Debt Stop You From Getting a Mortgage?
In most cases, no. But there are scenarios where HECS debt becomes a meaningful obstacle:
- Borrowing at your maximum capacity — If your serviceability is already tight, HECS repayments can push you over the line into “declined” territory.
- High HECS balance relative to income — A graduate earning $70,000 with $80,000 of HECS debt will feel the impact more than one earning $120,000 with the same debt.
- Multiple debts stacked together — HECS combined with personal loans, credit cards, and Buy Now Pay Later commitments can compound the serviceability hit.
- Applying to lenders with strict policies — Some lenders treat HECS more conservatively than others.
The good news? Every one of these challenges has a workaround. A skilled mortgage broker can structure your application, choose the right lender, and present your financial position in a way that works with your HECS debt rather than against it.
How HECS Impacts Borrowing Power in 2026
Here’s the technical bit, explained simply.
When a lender assesses your home loan application, they calculate your serviceability — your ability to repay the loan from your income after all other expenses and obligations. HECS repayments are treated as a recurring expense that reduces your net income available for the mortgage.
How Lenders Assess HECS/HELP Debt
Lenders typically consider HECS debt in three ways:
- As a deduction from your gross income — Your HECS repayment is treated as a fixed monthly obligation that reduces the income available to service the mortgage.
- In your debt-to-income (DTI) ratio — Until recently, HELP debt was included in DTI calculations. APRA’s June 2025 changes removed HELP repayments from the DTI reporting definition, recognising that HELP is income-contingent rather than a traditional debt.
- Through your payslip take-home pay — Some lenders use your net take-home pay (after PAYG tax including HELP withholding) as the starting point, which automatically factors HECS in.
Under the 2025-26 marginal repayment system, HECS reduces your borrowing power proportionally to how far your income sits above $67,000.
How Much Does HECS Reduce Borrowing Capacity?
Let’s run some real numbers.
Example 1: Graduate on $85,000 with $25,000 HECS debt
- HECS repayment income above threshold: $85,000 − $67,000 = $18,000
- Compulsory repayment (15c per dollar): $2,700 per year (~$225/month)
- Estimated reduction in borrowing capacity: $25,000 to $40,000 (depending on lender)
Example 2: Couple — one partner has $30,000 HECS, other has no debt
- Partner A earns $90,000 with HECS, Partner B earns $75,000 without
- Combined HECS repayment: ~$3,450/year
- Combined gross income: $165,000
- Estimated reduction in joint borrowing capacity: $20,000 to $35,000
Example 3: Higher earner on $140,000 with $40,000 HECS
- Repayment under marginal system: $8,700 + 17c per $1 over $125,000 = ~$11,250/year
- Estimated reduction in borrowing capacity: $50,000 to $70,000
These are indicative — every lender calculates serviceability differently. For a precise figure, use a home loan borrowing power calculator or speak to a broker.
Side-by-Side: Borrowing Power Comparison
| Scenario | Income | HECS Debt | Approx. Borrowing Capacity |
|---|---|---|---|
| Single, no HECS | $85,000 | $0 | ~$520,000 |
| Single, $25k HECS | $85,000 | $25,000 | ~$480,000 |
| Single, $50k HECS | $85,000 | $50,000 | ~$475,000 |
| Couple, no HECS | $165,000 combined | $0 | ~$1,050,000 |
| Couple, one with $30k HECS | $165,000 combined | $30,000 | ~$1,015,000 |
These figures are illustrative only. Actual borrowing capacity depends on individual circumstances, expenses, deposit, lender policy, and current interest rates.
How Different Lenders Treat HECS Debt
This is where it gets interesting — and where a mortgage broker really earns their fee.
Not all lenders treat HECS debt the same way. After APRA’s June 2025 guidance updates, some Australian banks moved quickly to update their policies, while others took a more conservative approach.
Lender Categories in 2026
Flexible Lenders These lenders may exclude HELP debt from serviceability if your debt will be repaid within 12 months, or if your debt is small relative to your income. Some treat HELP as a “soft” liability rather than a hard debt.
Standard Lenders The most common approach: include HECS repayments as a monthly expense based on your current income and the applicable repayment rate. Most major Australian banks fall into this category.
Conservative Lenders A small number of lenders still apply higher buffer rates or treat HELP debt as if it were a permanent fixed expense. These lenders generally offer less competitive borrowing capacity for HECS borrowers.
Why This Matters
The difference between a flexible and a conservative lender can mean $50,000 to $100,000+ in additional borrowing capacity for the same borrower. Choosing the right lender is often more impactful than paying down your HECS debt.
NAB has published useful information on how it assesses HECS debt and home loans — worth reading if you’re considering applying with one of the big four.
Centria Finance compares 40+ Australian lenders to identify which ones will give you the strongest borrowing power based on your HECS situation.
HECS Debt vs Other Liabilities: How They Compare
Many first home buyers worry HECS debt is the worst kind of liability for getting a mortgage. It’s actually one of the better ones.
| Liability Type | Impact on Borrowing | Removable Before Application? | Indexation/Interest |
|---|---|---|---|
| HECS/HELP debt | Moderate — income-contingent | Yes, via voluntary repayment | CPI indexation only |
| Credit card debt | High — 3.8% of credit limit per month assumed by lenders | Yes — close unused cards | Up to 22% p.a. |
| Personal loan | High — full monthly repayment counted | Yes — pay out and close | 8–15% p.a. |
| Car loan | High — full monthly repayment counted | Sometimes | 6–10% p.a. |
| Buy Now Pay Later | Moderate — recent payments scrutinised | Yes — close accounts | Late fees |
| Afterpay / Zip | Moderate to high — viewed as discretionary spending | Yes — clear and close | Variable |
The takeaway: closing your credit cards or paying off a car loan often does more for your borrowing power than paying off HECS. This is one of the most common mistakes we see first home buyers make.
Should You Pay Off HECS Early?
This is one of the most common questions we hear at Centria Finance. The honest answer: usually no, but sometimes yes.
When Paying Off HECS Early Doesn’t Help
- HECS is indexed at CPI (3.2% in 2025) — lower than most home loan interest rates
- Money spent paying off HECS reduces your deposit, which often hurts borrowing power more
- A larger deposit usually beats a paid-off HECS, dollar-for-dollar
- Your HECS repayments end automatically when the debt is cleared — early payment doesn’t give you a refund
When Paying Off HECS Early Can Help
- Small HECS balance — If you only have $3,000–$8,000 left, paying it off entirely can remove the repayment obligation and meaningfully boost borrowing power.
- Crossing the threshold — If a partial voluntary repayment of $5,000–$10,000 brings your debt close to zero, you may eliminate a small but persistent monthly cost.
- Tight serviceability — If your application is borderline and HECS is the last thing pushing you over the line, paying it off can be the difference between approved and declined.
The decision should always be made in the context of your specific application, not as a general rule. We model both scenarios for our clients before they make this call.
Recent APRA and Bank Policy Changes (2025-26)
A lot has changed in the last 18 months. Here’s what every HECS borrower needs to know.
APRA’s June 2025 Changes (Effective 30 September 2025)
APRA finalised changes to Prudential Practice Guide APG 223 Residential Mortgage Lending that give lenders new flexibility:
- HELP repayments can be removed from serviceability assessments where the borrower will be largely unaffected by HELP debt repayments over the term of the mortgage (typically when the debt will be repaid within 12 months).
- HELP repayments are no longer counted in the debt-to-income (DTI) ratio for reporting purposes — recognising HELP is income-contingent and fundamentally different from traditional debt.
These are official changes from APRA, the prudential regulator of Australian banks. The full guidance is available on APRA’s website.
What This Means for You
- If your HECS balance is small and likely to be repaid within 12 months, some lenders may now ignore it completely in serviceability.
- The DTI changes make it easier for borrowers with HECS to clear bank lending limits — particularly for higher-income borrowers.
- Not every lender has updated its policies to the same extent — which is why lender choice matters more than ever.
ASIC Responsible Lending Update
In parallel, ASIC updated its responsible lending guidance to clarify treatment of HELP debt. The combined effect of APRA + ASIC changes signals a clear regulatory push to make home ownership more accessible for Australians with student debt.
Best Strategies to Get Approved Faster
Here’s our broker playbook for HECS borrowers in 2026.
1. Get Pre-Approved First
A home loan pre-approval gives you certainty about your borrowing capacity before you start house-hunting. Pre-approval typically lasts 3–6 months and shows sellers you’re a serious buyer.
2. Choose the Right Lender
Different lenders treat HECS very differently. A broker who knows lender policies can identify which bank will give you the highest borrowing capacity for your specific situation.
3. Apply Jointly Where Possible
A joint application combines two incomes, often diluting the proportional impact of HECS. For couples where one partner has HECS and the other doesn’t, this is one of the most effective strategies.
4. Clean Up Other Debts First
Close unused credit cards, pay out personal loans, clear Buy Now Pay Later accounts. These usually have a bigger impact on borrowing power than HECS itself.
5. Strengthen Your Deposit
A 20% deposit avoids Lenders Mortgage Insurance (LMI), but even saving an extra 1–2% can meaningfully improve your loan-to-value ratio (LVR) and unlock better interest rates.
6. Time Your Application Strategically
Apply after a pay rise has been documented for at least 3 months. Apply before taking on new debt. If you’re due a tax refund that will pay down HECS, time accordingly.
7. Document Your Income Carefully
Bonuses, overtime, and commission all factor into serviceability — but lenders need to see a stable history. Two years of consistent documentation typically gives you the best result.
8. Use a Specialist Mortgage Broker
A broker who specialises in first home buyer and complex serviceability cases will know which lenders to approach, how to structure your application, and how to maximise your approved amount.
HECS Debt and First Home Buyer Schemes
Good news: HECS debt does not disqualify you from any of the major Australian first home buyer schemes.
Schemes You Can Access in 2026
First Home Guarantee (FHBG) Buy with as little as a 5% deposit, with the government guaranteeing the rest. No Lenders Mortgage Insurance required.
Regional First Home Buyer Guarantee Similar to the FHBG, specifically for regional Australia.
Family Home Guarantee Single parents can buy with a 2% deposit.
Help to Buy Scheme The federal shared equity scheme — the government contributes up to 40% equity, reducing your loan size.
First Home Super Saver Scheme (FHSSS) Save for your deposit inside your superannuation, accessing tax advantages.
State-based stamp duty concessions Each state and territory offers stamp duty relief for first home buyers — significant in NSW, VIC, QLD, and WA in particular.
A mortgage broker can help you stack multiple schemes for maximum benefit.
Centria Finance and First Home Buyer Schemes
We specialise in helping clients navigate these schemes — many first home buyers don’t realise they’re eligible for multiple programs simultaneously. Learn more about our First Home Buyer services →
Refinancing with HECS Debt
If you already have a home loan and a HECS debt, refinancing in 2026 can unlock significant savings — especially given the APRA changes.
Why Refinance with HECS?
- Lower interest rates — Switching lenders can save thousands per year
- Access better policies — Some lenders now treat HELP more favourably than they did when you first applied
- Increased borrowing capacity — If you’re refinancing to access equity for renovations or an investment property, the new APRA rules may help
What to Watch Out For
Lenders re-assess your serviceability at refinance using current policies. If your HECS has been partially paid down, or if you’re now earning more, you may qualify for a much larger loan than you did initially.
Learn more about Centria Finance refinancing services →
Lender Assessment Checklist for HECS Borrowers
Use this checklist before submitting your application to maximise your chances of approval.
- [ ] HECS-HELP balance confirmed via myGov / ATO online services
- [ ] Recent payslips (2–3 months) showing HECS withholding
- [ ] Last 2 years of tax returns and notices of assessment
- [ ] All credit cards with unused limits closed
- [ ] Buy Now Pay Later accounts cleared and closed (no activity for 3+ months ideally)
- [ ] Personal loans and car loans documented (or paid out)
- [ ] 3 months of bank statements showing stable expenses
- [ ] Genuine savings history of at least 5% of purchase price
- [ ] Employment confirmed for 6+ months in current role (3+ months for some lenders)
- [ ] First home buyer scheme eligibility checked
Step-by-Step: Home Loan Approval Process for HECS Borrowers
Here’s the path from “thinking about buying” to “keys in hand.”
Step 1: Borrowing Power Assessment
Speak to a mortgage broker. They’ll model your borrowing capacity with HECS factored in, across multiple lenders.
Step 2: Strategy Session
Identify the best lender(s), schemes you qualify for, and any pre-application moves that will improve your position.
Step 3: Document Collection
Payslips, tax returns, ID, bank statements, HECS balance, expense summary.
Step 4: Pre-Approval
The broker submits a pre-approval application. The lender confirms (subject to property valuation) how much they’ll lend.
Step 5: House Hunting
Search with confidence within your approved budget.
Step 6: Full Loan Application
Once you’ve signed a contract of sale, the broker submits the full application with property details.
Step 7: Valuation and Unconditional Approval
The lender values the property and issues formal approval.
Step 8: Settlement
Funds are released, you receive the keys, and your mortgage begins.
For most first home buyers with HECS debt, this process takes 6 to 12 weeks from initial broker meeting to settlement.
Common Mistakes Borrowers Make
We see these every week. Avoid them.
- Paying off HECS instead of building a deposit — Usually the wrong call. Run the numbers first.
- Applying with the wrong lender — Different lenders = different borrowing capacity. The first lender you walk into may not be the right one.
- Not closing unused credit cards — A $10,000 unused credit card can reduce your borrowing power by $40,000+.
- Taking on new debt before applying — Avoid car loans, personal loans, and Buy Now Pay Later in the 6 months before you apply.
- Underestimating expenses — Lenders verify your real expenses against your bank statements. Don’t lowball.
- Skipping pre-approval — Without pre-approval, you’re shopping blind.
- Going direct to a bank instead of using a broker — A broker shops you to 40+ lenders; a bank only offers their own products.
How a Mortgage Broker Can Help
A specialist mortgage broker is the single most valuable resource for any HECS borrower. Here’s why.
What Brokers Do for HECS Borrowers
- Compare 40+ lenders to find the one that treats your HECS most favourably
- Model multiple scenarios to show you the impact of paying down HECS vs other strategies
- Identify schemes you qualify for — many borrowers don’t realise they can access multiple programs
- Structure your application to present your financial position in the strongest light
- Negotiate rates and fees that you couldn’t get going direct
- Handle all the paperwork so you don’t have to navigate bank bureaucracy
- Provide ongoing advice about refinancing, equity access, and future investments
Brokers are paid by lenders, not by you — so the service is free to the borrower.
Why Choose Centria Finance
At Centria Finance, we’re an Australian mortgage and finance brokerage with deep expertise in first home buyer lending and complex borrowing scenarios — including HECS and HELP debt. We help clients across Sydney, Melbourne, Brisbane, Perth, Adelaide, and Australia-wide secure home loans with the right lender at the right rate.
What We Bring to the Table
- Experience — Years of helping first home buyers, young professionals, and couples with HECS debt navigate home loan approval
- Expertise — Up-to-date knowledge of the 2025-26 APRA changes, the 20% HECS reduction, and every lender’s HECS policy
- Authority — Access to 40+ Australian lenders, including major banks, credit unions, and non-bank lenders
- Trustworthiness — Fully credentialed, transparent, client-first approach. No fees to you. We compare lenders honestly to find the best fit.
Local Mortgage Brokers, Australia-Wide
Whether you’re buying your first home in Sydney’s Inner West, an apartment in Melbourne, a family home in Brisbane, a beachside property in Perth, or anywhere in Adelaide, Centria Finance provides expert mortgage advice tailored to your local market.
We work with clients in person, by video call, and by phone — wherever you are in Australia.
Ready to Get Started?
Don’t let HECS debt hold you back from your first home.
At Centria Finance, we’ll:
✅ Assess your borrowing power for free ✅ Model your application across 40+ lenders ✅ Identify every first home buyer scheme you qualify for ✅ Build a strategy to maximise your approval amount ✅ Handle the entire home loan process from pre-approval to settlement.
Frequently Asked Questions
Can I get a home loan with HECS debt in Australia?
Yes. HECS debt does not disqualify you from getting a home loan. It may reduce your borrowing capacity, but with the right lender and a smart strategy, most Australians with HECS debt can secure home loan approval — including first home buyers.
Does HECS affect home loan approval?
HECS affects your borrowing capacity by being treated as a regular monthly expense, reducing the income available to service the mortgage. It does not affect your credit score or appear on your credit report. The new APRA guidance from June 2025 allows some lenders to exclude HELP from serviceability if your debt is close to being repaid.
How much does HECS reduce borrowing power?
The impact varies by income, debt size, and lender. As a rough guide, a graduate earning $85,000 with $25,000 in HECS debt may see borrowing power reduced by $25,000–$40,000 compared to having no HECS debt. Higher earners with larger debts can see reductions of $50,000–$100,000.
Should I pay off my HECS before buying a home?
Usually no. HECS is indexed at CPI (3.2% in 2025), lower than most home loan rates. Using your savings to pay down HECS often reduces your deposit by more than it boosts your borrowing power. The exception: if you only have $3,000–$8,000 of HECS remaining, paying it off can eliminate the repayment obligation entirely.
What is the HECS repayment threshold for 2025-26?
The minimum repayment threshold for the 2025-26 financial year is $67,000, up from $54,435 in 2024-25. Compulsory repayments are now calculated only on income above this threshold using a marginal system — 15c per dollar between $67,000 and $125,000, with higher rates above that.
What was the 20% HECS debt cut?
In August 2025, the Australian Government legislated a one-off 20% reduction across all HECS-HELP balances. The ATO applied the reduction automatically to debts as at 1 June 2025, before annual indexation. The average debt of about $27,600 was reduced by around $5,520.
Do different lenders treat HECS debt differently?
Yes — significantly. Some lenders may exclude HELP debt from serviceability if it will be repaid within 12 months. Others apply standard or conservative policies. The difference between lenders can mean $50,000+ in borrowing capacity for the same borrower. A mortgage broker can compare lenders for you.
Can first home buyers with HECS debt access government schemes?
Yes. HECS debt does not disqualify you from the First Home Guarantee, Help to Buy Scheme, First Home Super Saver Scheme, Family Home Guarantee, or state-based stamp duty concessions. Many first home buyers can stack multiple schemes.
Can I refinance my mortgage if I still have HECS debt?
Yes, and refinancing in 2026 may unlock better outcomes than when you first applied — particularly given the APRA changes. A broker can compare current lenders and identify whether refinancing makes sense based on your HECS, equity, and income.
How can a mortgage broker help me get a home loan with HECS?
A broker compares 40+ lenders to find the one that gives you the highest borrowing power based on your specific HECS situation. They identify schemes you qualify for, structure your application, and handle the entire process. Brokers are paid by lenders, so the service is free to you.
Final Thoughts
In 2026, the path to home ownership for Australians with HECS debt is clearer than it’s been in years. The 20% debt cut, the higher repayment threshold, the new marginal system, and APRA’s updated guidance have all combined to make student debt less of an obstacle to mortgage approval.
But maximising your borrowing power still requires expertise. The right lender choice, the right scheme stack, and the right application strategy can be the difference between buying a one-bedroom apartment and buying the family home you actually want.
That’s what we do at Centria Finance. We’ve helped hundreds of Australians with HECS debt buy their first home — and we’d love to help you too.
Centria Finance — Australian mortgage brokers helping first home buyers across Sydney, Melbourne, Brisbane, Perth, Adelaide, and Australia-wide.
This article provides general information only and does not constitute personal financial advice. Borrowing capacity, lender policies, and government scheme eligibility depend on individual circumstances. Speak to a licensed mortgage broker or financial adviser before making any decisions.
