Key takeaways:
Eligible HELP balances were reduced by 20% in 2025. The one-off reduction applied automatically to eligible balances as at 1 June 2025.
Compulsory HELP repayments now use a marginal system. For most borrowers, repayments are calculated on income above the minimum threshold.
Lower HELP repayments may improve borrowing power for some borrowers. The impact depends on your financial position and the lender's serviceability assessment.
HELP can still affect a home loan application. Lenders may consider compulsory HELP repayments alongside your income, expenses and other debts.
Lender policies can differ. How HELP affects your borrowing capacity may vary depending on the lender assessing your application.
If you have HECS/HELP debt and are planning to buy a home, changes introduced in 2025 may affect your student debt repayments and home loan borrowing power.
Eligible outstanding HELP and other student loan balances received a one-off 20% reduction, while compulsory HELP repayments moved to a marginal system from 1 July 2025.
These changes may reduce compulsory repayments for some borrowers, potentially improving home loan serviceability. However, the impact on borrowing power will depend on your circumstances and the lender's credit policies. Here's what you need to know:
Eligible HELP and other student loan balances received a one-off 20% reduction in 2025.
Compulsory HELP repayments moved to a marginal system from 1 July 2025.
Lower compulsory repayments may improve borrowing power for some borrowers.
HELP debt can still affect your home loan serviceability.
How lenders assess HELP debt and repayments can vary.
Here's how the changes work, how they may affect your borrowing power and what to consider before applying for a home loan.
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What changed to HECS/HELP in 2025?
Two key changes to the HELP system took effect in 2025: a one-off reduction to eligible student loan balances and a new way of calculating compulsory repayments.
Eligible HELP debt was reduced by 20%
A one-off 20% reduction applied to outstanding HELP and other eligible student loan balances as at 1 June 20. The reduction was automatic, so borrowers did not need to apply. The reduction was effective from 1 June 2025.
Because indexation had already been applied on 1 June, the ATO retrospectively applied the reduction and adjusted the indexation to reflect the reduced balance.
Compulsory HELP repayments moved to a marginal system
From 1 July 2025, compulsory HELP repayments changed to a marginal system. Rather than applying a repayment rate to your total repayment income, repayments are calculated on the portion above the relevant threshold.
The minimum repayment threshold increased to $67,000 in 2025–26 and $69,528 in 2026–27. If your repayment income is below the applicable threshold, you generally won't have a compulsory HELP repayment for that income year.
Together, these changes may reduce both the HELP balance and compulsory repayments for eligible borrowers. For home buyers, lower compulsory repayments may affect how a lender assesses serviceability and borrowing power, depending on the lender's credit policy and your circumstances.
How does HECS/HELP affect your borrowing power?
HECS/HELP debt can affect your borrowing power because lenders may factor compulsory repayments into their home loan serviceability assessment. The impact depends on your financial position and the lender's credit policy. Three factors are relevant:
Your HELP balance: The amount you still owe. This may be particularly relevant if your HELP debt is expected to be repaid in the near term, depending on the lender’s policy.
Your compulsory HELP repayment: If one applies, it reduces the income available to meet other financial commitments.
Your overall serviceability: Lenders assess your income, expenses, debts and other commitments to determine whether you can afford the proposed home loan.
APRA guidance also gives banks some flexibility when a HELP debt is close to being repaid. By exception, a bank may choose to exclude HELP repayments from its serviceability assessment where it expects the debt to be repaid in the near term. APRA gives repayment within 12 months as an example, although individual lender policies and assessment criteria still apply.
As a result, two borrowers with HELP debt can have different borrowing capacities, even with similar incomes. Their HELP repayments, expenses and other debts may differ, as can the way lenders assess them.
Understanding how your HELP debt fits into your overall financial position can give you a clearer picture of how much you may be able to borrow.
How are HECS/HELP repayments calculated now?
Since 1 July 2025, compulsory HECS/HELP repayments have used a marginal repayment system. This means repayments are generally calculated on the portion of your repayment income above the minimum threshold, rather than applying a repayment rate to your total repayment income.
For 2026–27, the minimum HELP repayment income is $69,528, up from $67,000 when the marginal system commenced in 2025–26.
If your repayment income is $69,528 or less, you generally won't have a compulsory HELP repayment for the 2026–27 income year.
For repayment income above the threshold, the ATO calculates your compulsory repayment using the applicable marginal rates.
2026–27 repayment income | Compulsory repayment |
|---|---|
$69,528 or less | No compulsory repayment |
Above $69,528 | 15 cents for each $1 above $69,528 |
Above $129,717 | The amount above, plus 17 cents for each $1 above $129,717 |
Higher incomes | The repayment is capped at 10% of repayment income |
The ATO calculates the applicable marginal repayment or 10% of your repayment income, whichever results in the lower compulsory repayment.
Your repayment income isn't necessarily the same as your salary. It can include employment income as well as other amounts used by the ATO when calculating your compulsory HELP repayment, such as certain investment income.
Example: $80,000 repayment income in 2026–27
For someone with $80,000 in repayment income, the compulsory repayment is calculated on the amount above the $69,528 threshold:
$80,000 − $69,528 = $10,472
$10,472 × 15% = $1,570.80
The compulsory repayment would therefore be approximately $1,571 for the year, subject to the ATO's final assessment.
When the marginal repayment system first commenced in 2025–26, the minimum threshold was $67,000. That threshold has since increased to $69,528 for 2026–27.
Your compulsory repayment will depend on your repayment income and the thresholds and rates applying for the relevant income year.
Note: The example is for illustrative purposes only and is based on ATO repayment rates and thresholds for the relevant income year. Actual HELP repayments and home loan borrowing capacity will depend on your circumstances and, for home lending, the lender’s assessment criteria. Terms, conditions and lending criteria apply.
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How much could your borrowing power change?
The HELP changes don't automatically increase borrowing power. Lower compulsory repayments may improve serviceability for some borrowers, but the impact depends on your financial position and the lender's credit policy. Key factors include:
Factor | Why it matters |
|---|---|
Income | Helps determine your capacity to service a home loan. |
HELP repayment | Compulsory repayments may reduce the income available to service a loan. |
Living expenses | Affect how much income is available for repayments. |
Other debts | Credit cards, personal loans and car loans can reduce borrowing capacity. |
Lender policy | Lenders can assess HELP debt and serviceability differently. |
This means borrowers with the same income and HELP balance may have different borrowing capacities depending on their expenses, other debts and lender.
The way a lender calculates HELP repayments can also affect the outcome, says Benjamin Cummins, Retail Broker at Aussie Chatswood.
“Some lenders may use the HELP deduction shown on an applicant’s payslip, while others calculate the repayment they expect to apply based on the applicant’s income. That difference can become particularly relevant where income includes components such as bonuses,” Benjamin says.
“For example, I’ve seen scenarios where two applicants each earning a $100,000 base salary were assessed differently because one had HELP debt. With the same lender, the applicant with HELP debt had a borrowing capacity around $50,000 lower. That’s an example rather than a standard outcome, the actual impact will depend on the borrower’s circumstances and the lender’s assessment.”
Who is most likely to see an impact from the HECS changes?
The HECS/HELP changes won't affect every borrower's home loan borrowing power the same way. The impact depends on your income, expenses, other debts and how the lender assesses HELP.
Borrowers who may see more impact | Borrowers who may see less impact |
|---|---|
The changes may have a greater effect if: | The effect may be smaller if: |
Your compulsory HELP repayment has fallen under the marginal system, reducing a commitment the lender may consider when assessing serviceability. | Other debts are limiting your borrowing power, such as personal loans, car loans or credit card limits. |
Your eligible HELP balance was reduced by 20% and the remaining debt is now closer to being repaid, which may be relevant where a lender considers near-term repayment. | Your compulsory HELP repayment is already low or nil. |
HELP was materially affecting your serviceability, so a lower repayment could have a greater impact on your borrowing position. | The lender's credit policy still requires factoring HELP into its assessment. |
Ultimately, the impact depends on how significant HELP is within your overall financial position and how your lender assesses it.
What else changed for home loan borrowers in 2026?
From 1 February 2026, APRA introduced limits on high-DTI (debt-to-income) residential mortgage lending by APRA-regulated authorised deposit-taking institutions (ADIs).
APRA-regulated ADIs can have up to 20% of new owner-occupier lending and, separately, up to 20% of new investor lending at a DTI ratio of six times income or more. Banks can still lend above this level within the limit and subject to their lending policies.
APRA excludes HELP debt from its DTI calculation for this measure. However, lenders may still consider HELP repayments separately when assessing your home loan serviceability.
Should you pay off HECS before applying for a home loan?
Paying off your HECS/HELP debt before applying for a home loan won't suit every borrower. Before using your savings, consider whether clearing the debt could improve your borrowing position and how it may affect your deposit.
Benjamin says whether it makes sense to pay down or clear HELP before applying depends on more than the size of the debt.
“It depends on things like the HELP balance remaining, the applicant’s income and the lender’s policy,” Benjamin says.
“Some lenders may treat HELP differently when the balance is close to being repaid. In some cases, reducing or clearing the debt may improve serviceability, but you also need to consider what using those savings means for your deposit and overall position.”
Key factors to consider include:
Your HELP balance: A smaller balance may be more practical to clear, but there is no set amount at which paying it off makes sense.
Your compulsory repayment: Check whether clearing HELP would remove a repayment commitment considered in your serviceability assessment. Keep in mind that voluntary HELP repayments are separate from any compulsory repayment you may be required to make and generally do not reduce or offset that compulsory repayment.
Lender policy: Lenders can treat HELP differently, so the impact of paying it off can vary.
Your deposit: Using savings to clear HELP leaves less available for your deposit and upfront buying costs.
Other debts: Credit cards, personal loans and other commitments can also affect borrowing power.
Your overall position: Consider your deposit, borrowing capacity and buying costs together rather than HELP in isolation.
HELP does not charge interest in the conventional sense, although outstanding balances are generally indexed annually. This makes it important to understand the potential home loan impact before making a voluntary repayment.
Pro tip: An Aussie Broker can compare how participating lenders on our panel may assess your HELP debt and help you understand the potential impact of paying it off before you use your savings.
How to prepare for a home loan with HECS/HELP debt
If you have HELP debt, reviewing your finances before applying can help you understand your borrowing position and how lenders may assess you.
1. Check your HELP balance
Log in to myGov and check your linked ATO account for your current HELP balance. This gives you an up-to-date figure to discuss with your broker or lender.
2. Review your borrowing position
HELP is only one part of a home loan assessment. Review your income, living expenses, credit cards and other debts, available deposit and upfront buying costs.
You can use Aussie's borrowing power calculator to estimate how much you may be able to borrow. Your actual borrowing capacity will depend on your circumstances and the lender's assessment criteria.
You might also be interested in: How to boost your borrowing power before buying your next home
3. Compare lender policies
Lenders can assess HELP debt differently, so your borrowing capacity may vary between lenders.
Comparing how lenders assess HELP before you apply can give you a clearer picture of your borrowing power and home loan options.
Talk to an Aussie Broker about your borrowing power
The HELP reforms have changed how compulsory repayments are calculated, which may improve serviceability for some borrowers. But HELP can still form part of a lender's home loan assessment, and the impact on borrowing power will depend on your circumstances.
Lender policies also differ. An Aussie Broker can review your financial position and compare how participating lenders may assess your HELP commitments, helping you understand your home loan options.