Does HECS/HELP debt affect your home loan borrowing power?

Yes, but not the way most people think. Lenders don’t care about your HECS balance; they care about the compulsory repayment coming out of your pay. That repayment reduces your net income, and net income drives borrowing power.

How much difference does it make?

HECS repayments scale with income, from around 1% to 10% of pay. For a borrower on $110,000, that’s roughly $7,000–$8,000 a year of income the lender can’t count, which can trim borrowing capacity by $60,000–$100,000 depending on the lender’s model.

A worked example

Say you’ve got $15,000 of HECS left and you earn $125,000 a year. At that income the compulsory repayment works out to roughly $781 a month.

When a lender runs servicing, that $781 comes off your usable income every month before they work out what you can borrow. Less income, lower borrowing capacity. And it makes no difference to the lender whether the balance behind that repayment is $15,000 or $80,000: the deduction is the same.

In this scenario, moving to a lender that can disregard the HECS repayment adds roughly $80,000–$100,000 of borrowing power.

The lenders that can remove HECS from servicing

A handful of lenders now have policy that lets a broker exclude the HECS liability from servicing altogether, provided one of the following applies:

• The balance is under $20,000, or
• It will be cleared organically through compulsory repayments within the next 12 months, or
• It’s forecast to be paid off within the next 1–5 years based on your income.

If you’re close to clearing HECS, or sitting under that $20,000 mark, it’s worth having those lenders on the shortlist before you apply anywhere else. Not every bank offers this, and the ones that do don’t advertise it.

Should you pay it off before applying?

Sometimes. If your balance is small, under a year or two of repayments, clearing it removes the repayment entirely and can buy back serious capacity, often a better use of savings than a marginally bigger deposit. If the balance is large, paying it down partially achieves nothing: the compulsory repayment stays the same until the debt is gone. It’s all or nothing.

The 2026 wrinkles worth knowing

• Recent reforms cut student debt balances and lifted repayment thresholds, check your current balance on myGov before assuming.
• Regulators have told lenders to take a more sensible view of HECS that is close to being repaid, which is where the exclusion policies above came from. Expect more lenders to follow.
• HECS doesn’t appear on your credit file and doesn’t hurt your credit score.

Whether to clear HECS, save a bigger deposit, or just pick a friendlier lender is a 10-minute modelling exercise. Ask Nathan before you drain the savings account.