If you are carrying HECS/HELP debt and planning to apply for a home loan, it is normal to worry about how it may affect your HECS home loan approval. In reality, HECS or HELP does not automatically stop you from getting approved, but HECS and borrowing capacity are often linked through serviceability, depending on the lender and how repayments are modelled.
In this guide, we will walk through what banks usually look at, what has changed recently in Australia, and what you can do to prepare before you apply. If you are comparing options with mortgage brokers in Sydney, we can help you understand which lender policies may fit your situation and what documents are likely to be needed, without you lodging multiple applications.
Where HECS Shows Up In A Home Loan Assessment
Banks do not “judge” HECS the way they might view credit cards or personal loans. Instead, lenders usually treat it as an ongoing, income-linked repayment, which can reduce the income used in a HECS serviceability assessment.
You will typically see HECS/HELP considered in three main places.
1. Your net income for serviceability
Many lenders assess your ability to repay using an income and expense model. If you have HELP, your payslip may show a higher tax withholding, which reduces your take-home pay. Some lenders factor this in directly, others model HELP as a separate commitment. Either way, the result can be similar, with less net income available for the home loan repayment calculation.
That is the core reason HECS can reduce borrowing power.
In simple terms, it can reduce the amount a lender may be willing to approve.
2. Your Debt-to-Income ratio might be impacted, depending on timing and lender
Some lenders use DTI (debt-to-income) as one of several risk checks. Recent APRA guidance changes mean ADIs are being guided on how HELP is treated in reporting and DTI calculations, with updates taking effect from 30 September 2025 for reporting.
What this means for you in practice is still lender-specific, because each bank’s credit policy and internal calculator settings can differ.
That is the “why your result can differ bank to bank” part.
3. “Near-term payoff” can change the outcome for some borrowers
APRA has clarified that, by exception, it can be reasonable for a bank to remove HELP repayments in serviceability where the borrower is expected to pay off the HELP debt in the near term through compulsory repayments.
Some banks have announced policy changes aligned to this idea. For example, Commonwealth Bank has publicly reported it may not count HECS/HELP in some home loan assessments where the debt is expected to be repaid within 12 months, and NAB has reported it may disregard student debts of $20,000 or less in its assessment from 31 July 2025. These are lender-specific examples, and policies can change.
This is where lender policy differences can matter most.
The Student Loan Repayment Rules Changed, And That Matters
Your HELP repayment is not a fixed monthly payment like a car loan. It is income-linked, and the ATO sets the repayment thresholds and rates.
From the 2025–26 income year, the ATO moved HELP compulsory repayments to a marginal calculation above the minimum threshold, rather than applying a single rate to your full income.
This matters because lenders that model HELP based on expected repayments may adjust their calculators over time to reflect the way repayments work.
What Banks Usually Need From You, So HECS Is Assessed Correctly
If HECS is recorded incorrectly, it can distort your borrowing power in either direction. These are the items we commonly see lenders request or verify.
ATO balance evidence
Some lenders may want a current ATO position to confirm the outstanding HELP balance, especially if you are close to paying it off. Evidence may include an ATO statement or an integrated view from your tax agent, depending on the lender and the application channel.
Payslips that show your withholding
Your most recent payslips can show whether HECS is being withheld already. If it is not being withheld and it should be, the lender may still model the repayment in serviceability.
Timing context if you are close to clearing the debt
If you are genuinely close to paying it out, some lenders may consider that “near-term payoff” approach, but they still need to see evidence that supports it.
What “banks actually do” with HECS, in real decision terms
When a lender says HECS affected your application, it is usually one of these scenarios.
Scenario A. You are comfortably within borrowing power, and HECS changes nothing material
If your income and expenses leave a clear buffer, HECS may not change the approval outcome at all. It may slightly reduce the max amount, but not enough to impact your plan.
That is the “approved either way” outcome.
Scenario B. You are near the edge, and HECS reduces the max loan amount
This is common for first home buyers, especially when rates and buffers are tight, and borrowing capacity is more limited. HECS can be the difference between qualifying for a target amount and needing to adjust the purchase price, deposit, or loan type.
That is the “adjust the numbers” outcome.
Scenario C. Your HECS is almost finished, and lender policy becomes the deciding factor
This is where lender differences can matter most. Some lenders may take a more flexible approach when payoff is near-term, others may still treat HELP as ongoing until it is cleared.
That is the “choose the right policy fit” outcome.
Moves That May Help, Without Gaming The System
HECS is not something you need to hide, and you should not. What helps is making sure the lender is assessing it with accurate inputs and realistic timing.
Here are options that may be worth discussing with your broker or lender.
Check if you are genuinely close to paying it out
If your HELP balance is small and your income suggests it will clear soon via compulsory repayments, some lenders may consider an exception. It still depends on the bank’s policy and evidence.
Avoid changing jobs right before you apply if you can help it
This is not about HECS specifically, it is about reducing variables during assessment. Stability can make the overall application simpler.
Reduce other adjustable commitments first
If you have credit limits you do not use, buy now pay later accounts, or multiple cards, these can sometimes have a bigger serviceability impact than HECS. HECS is usually non-negotiable, but other commitments may be manageable.
Quick Answers People Search Right Before They Apply
Will HECS stop me from getting approved?
Not necessarily. HECS can reduce borrowing power because it affects take-home pay or modelled commitments, but approval depends on the whole file, including income, living costs, other debts, property type, and the lender’s policy, which links closely to common rejection reasons.
Do banks treat HECS like a personal loan?
Usually not in the traditional sense. It is often treated differently because repayments are income-linked through the tax system, not a fixed contract repayment.
Have the rules changed recently?
Yes. APRA finalised targeted changes on HELP debt treatment guidance for ADIs, with reporting changes effective from 30 September 2025, and the ATO updated HELP repayment calculations from 2025–26. Individual banks have also announced their own policy changes.
HECS-Ready Checklist Before You Speak To A Broker Or Bank
Before you apply, it helps to have these ready.
- Your latest payslips, showing whether HELP is withheld
- A current view of your HELP balance via the ATO or your accountant
- A clear picture of your other liabilities and credit limits
- A realistic purchase budget range, not just a single number
- A plan for what you will do if the max borrowing amount comes in lower than expected
This is also where we often add value at Unconditional Finance, by comparing lender policy settings and calculator outcomes before you commit to a full application, so you know what is realistic for your situation.
A Clearer Way To Move Forward With HECS In The Background
HECS/HELP debt is common, and lenders deal with it every day. The key is understanding how it flows through serviceability, and choosing a lender policy that matches your timing and evidence, rather than guessing.
If you would like to see what options may be available for your situation, Unconditional Finance can help you compare policies and guide you through the next steps.
Disclaimer: This information is general in nature and does not take into account your objectives, financial situation, or needs. Credit products are subject to lender eligibility criteria, terms and conditions, and fees. Lender policies and assessment methods can change without notice. Consider getting personal advice from a licensed professional before making financial decisions.
Frequently Asked Questions (FAQs)
Paying off HECS in a lump sum may improve borrowing capacity, but usually only after the ATO records the balance as cleared. Some lenders will still include HECS in serviceability until the debt is fully repaid and visible on updated ATO records. Timing matters, and the benefit is not always immediate.
HECS generally does not affect your interest rate directly. Rates are usually based on the loan product, LVR, and broader risk settings. However, if HECS reduces your borrowing capacity, it may indirectly affect which loan products or property price ranges are available to you.
Yes, assessment can differ. For PAYG applicants, HECS is often reflected through payslip withholding or modelled repayments. For self-employed borrowers, some lenders may rely on taxable income and apply a notional HECS repayment based on income levels. The method varies by lender policy.
Yes. In a joint application, HECS is usually assessed against the borrower who holds the debt, which can still affect the overall serviceability of the application. How this impacts the final borrowing amount depends on income split, liabilities, and the lender’s calculator.
Typically, yes. When assessment rates or buffers increase, available borrowing capacity becomes tighter. In those conditions, HECS can have a more noticeable impact because there is less surplus income available in the lender’s serviceability model.