Does a HECS-HELP debt still reduce how much I can borrow in 2026?
In most cases, yes — but the effect is smaller than it was two years ago. When a bank assesses your home loan, it deducts your compulsory HELP (Higher Education Loan Program) repayment from your income before working out what you can afford. That lowers your borrowing power. The important shift is that it's your repayment, not your balance, that drives the calculation — and the rules around both repayments and reporting have moved in borrowers' favour.
In our experience, a typical HELP repayment reduces borrowing capacity by roughly $15,000 to $40,000, depending on your income and the lender's assessment rate. It's rarely a deal-breaker on its own, but it can be the difference between the property you want and the one you settle for.
What did the 20% student debt cut actually change?
The Government applied a one-off 20% reduction to every outstanding HELP and student loan balance as it stood on 1 June 2025, before that year's indexation was added (Department of Education, 2025). The cut removed more than $16 billion in student debt across over 3 million Australians, and the ATO finished processing the reductions during 2025. The 3.2% indexation for 2025 was then calculated on the smaller, reduced balance.
Here's the part borrowers often misunderstand: a smaller balance does not, by itself, lift your borrowing power. Because lenders assess your compulsory repayment — which is set by your income, not your balance — a lower balance only helps your application when it brings you close enough to zero that the debt will clear within a year or so. For borrowers near the finish line, the 20% cut can be genuinely powerful.
How do lenders count my HELP repayment now?
Lenders still consider your HELP repayment in serviceability, but some may disregard it where you're close to repaying the debt. We have identified one niche lender that will remove repayments completely for a balance of under $20k, potentially boosting your borrowing power by as much as $59,600. In practice, policy now varies meaningfully between lenders — and that's where a broker earns their keep.
It also helps to understand the repayment system itself. From the 2025–26 income year, compulsory repayments switched to a marginal system: you repay nothing on income up to the threshold, then a set rate on the income above it (ATO). For 2025–26 that threshold was $67,000; for 2026–27 it rose to $69,528, with 15 cents in the dollar applying above it (ATO). The upshot is that many middle-income borrowers now have a smaller compulsory repayment than under the old flat-rate system — and a smaller repayment means a smaller hit to borrowing power.
- Some lenders will ignore the repayment entirely once your balance is small enough to clear within roughly 12 months.
- Others apply a set percentage of income regardless of balance — less generous if you owe very little.
- A few take a middle path, scaling the repayment to your actual notice-of-assessment figure.
Choosing the right lender for your situation is exactly the kind of positioning we handle for first home buyers every week.
Should I pay off my HELP debt before applying for a home loan?
Sometimes — but far less often than people assume. If your balance is small (say, under $8,000–$10,000), clearing it can remove the repayment from serviceability and add to your borrowing power. But that cash usually does more good sitting in your deposit or offset. The trap we see most often is a buyer draining their savings to zero a HELP debt, only to trip the deposit or genuine-savings test and lose ground overall.
Before you pay a cent down, model both scenarios. Our borrowing power and repayment calculators are a good starting point, and we'll run the same numbers against live lender policy so you're comparing like with like. Consult a trusted mortgage broker to understand how this will affect you.
How can I position my application to minimise the HECS impact?
The single biggest lever is lender selection — matching your balance and income to a bank whose HELP policy suits you. Beyond that:
- Get an accurate repayment figure. Bring your most recent notice of assessment and payslips so we assess your real compulsory repayment, not an overstated estimate.
- Time a near-complete payoff. If you're within a year of clearing the debt, evidence of that can unlock lenders who disregard the repayment.
- Keep your deposit intact. A larger deposit lowers your loan-to-value ratio, which can reduce or avoid Lenders Mortgage Insurance — usually worth more than the HELP saving.
- Trim other liabilities. Reducing credit card limits and buy-now-pay-later accounts frees up capacity that offsets the HELP repayment.
Every situation is different, and the right move depends on your income, balance and deposit. If you'd like us to map your specific numbers against current lender policy, book a 30-minute strategy call below — we'll tell you plainly whether your HELP debt is worth acting on before you buy.
Frequently asked questions
Do I have to declare my HECS-HELP debt when I apply for a home loan?
Yes. You must disclose all study and training support loans on your application. Lenders verify HELP repayments through your payslips, tax returns and ATO records, so leaving it off can delay or sink your approval. Honest disclosure lets your broker pick the lender that treats your debt most favourably.
Does the 20% HELP debt cut increase my borrowing power?
Only indirectly, and usually modestly. Borrowing power is driven by your compulsory repayment, not your balance, so a smaller balance mainly helps if it brings you close to paying the debt off. Once a lender can see the loan will clear within about 12 months, many will disregard the repayment entirely, which can lift borrowing capacity.
Should I make a lump-sum HELP repayment before buying a home?
Sometimes, but not always. Clearing a small balance can remove the repayment from serviceability and add to your borrowing power, but it also drains the deposit and savings buffer lenders want to see. For most first-home buyers the deposit does more heavy lifting, so run the numbers with your broker before paying anything down.
Will paying off my HELP debt help me avoid Lenders Mortgage Insurance?
Not directly. Lenders Mortgage Insurance is triggered by your loan-to-value ratio, not your HELP debt. But if a lump sum you would have used to clear HELP is instead added to your deposit, that larger deposit can reduce or avoid LMI, which is usually the better use of the cash.
