Time to read : 4 Minutes
Why Graduates With Hecs Debt Are Falling Behind In The Home Ownership Race
HECS-HELP is another stumbling block for tertiary graduates trying to own a home and start their lives.
With large education debts on their balance sheets, these would-be Aussie homeowners are finding it harder to qualify for loans. These days, HECS-HELP could be referred to by a more honest word: debt.
Why does HECS-HELP impact my home loan?
Every year, over 300,000 students complete their degrees at one of Australia’s 39 universities.* Most of them graduate with a HELP debt. The Australian Tax Office (ATO) says HELP debt stands at $81 billion Australia-wide, as of November 2024.
The Higher Education Contribution Scheme (HECS) or Higher Education Loan Program (HELP) began in 1989.
HECS-HELP loans are purportedly ‘interest-free’.
Once you earn over $54,435, your HELP repayments are deducted from your gross wage packet by your employer.
Your loan amount is indexed each June, so your debt keeps pace with inflation.
In July 2022, APRA (Australian Prudential Regulatory Authority) made it mandatory to include all HECS-HELP debts in mortgage applications.
Tertiary educated graduates are struggling to qualify for home loans with their HECS-HELP repayments weighing down their finances. This has a bit to do with indexation.
How HECS-HELP indexation works
The indexed amount is added on to your existing debt.
The percentage you’ll repay is adjusted in line with your annual income.
These function together to act similarly to an interest rate on any other loan.
Usually, the indexation is a relatively small amount, but when inflation spiked, so did thousands of graduates' HECS-HELP debts.
Year | HECS-HELP Indexation rate |
2024 | |
2023 | |
2022 | 3.9% |
2021 | 0.6% |
2020 | 1.8% |
Important Note: This table has been updated in line with 2025's government initiatives adjusting the past two years of HECS indexation. You can read about these here. Note that 2025's indexation figure is only announced in June.
Translate this into English for me...?
Put simply, until 2025 your HECS-HELP loan balance rises by the indexed amount. For example:
Your HELP Debt = $40,000
Your Indexed amount for 2023 (7.1%) = $2,840
Your HELP debt for the next 12 months = $42,840
Your repayment amount = $2,840, or $237 per month.
Be aware: Your specific repayment amount depends on your gross annual income. The average wage for tertiary graduates in 2024 is around $74,944. At this income level, you’ll repay around 3.5% of your overall HELP debt this year, which is $219 per month.
This may not seem like a lot of money out of your wage, but it makes a big impact on how much you can borrow when you’re applying for a loan (that’s any kind of loan, not just a home loan, but yes – those too).
If you’re looking to get into the property market, your borrowing capacity affects what sort of home you can afford
How banks treat your debts:
Any credit application you make must now include your HELP debt, buffered as per APRA’s standard lending requirements. This affects your borrowing capacity like so:
Your Borrowing Capacity in 2024:***
Salary | HECS-HELP Debt | Borrowing Capacity (with HECS-HELP) | Borrowing Capacity (withOUT HECS-HELP) | LOST Borrowing Capacity | |
|---|---|---|---|---|---|
Average Graduate | $75,000 | $27,000 | $489,000 | $511,000 | $22,000 |
Average Couple | $140,000 | $60,000 | $1,087000 | $1,135,000 | $48,000 |
Couple with 1 postgrad degree**** | $190,000 | $95,000 | $1,633,000 | $1,703,000 | $70,000 |
Single with 7 years extended studies | $120,000 | $100,000 | $941,000 | $1,022,000 | $81,000 |
A reminder that the median unit price in Sydney is $865,422 as of November 2024.^ Houses are, obviously, dearer at $1,482,750^.
The median unit price across all our capital cities is $896,613,^^ so if you worked hard at school to get into uni, and earned your degree to improve your job prospects, with a view to starting your family in a home of your own, this may not be your year.
Bottom line
Break out the avo toast because owning your own home just became more difficult for some of our hardest working Aussies. Want some good news? Indexation is looking less scary in 2025, so don’t give up yet.
Go Deeper:
Buying your first home - Everything you need to know
