Time to read : 5 Minutes
If your HECS-HELP debt has been the annoying roadblock keeping you from homeownership – and my former broker colleagues have seen their fair share of this recently – 2025 might finally be your year.
For the first time since 2022, banks may stop counting HECS repayments into your borrowing power calculations. Translation? Your borrowing capacity could get a much-needed boost, making your dream home a little more attainable.
This change is part of the government’s ongoing push to help young Australians enter the property market sooner. But before you start house hunting, let’s break down what’s changing and whether this actually benefits you.
What's changing for Aussies with a HECS debt applying for a home loan?
Historically, banks have treated HECS debt like a personal loan – meaning having a HECS debt and how much you owe on HECS reduces the amount you could borrow to buy a home.
Now, banks are able to leave HECS repayments out of the ‘serviceability assessment’ if your debt is nearly paid off.
Important: this change is not a cure-all.
What does this mean for graduates with a student loan looking to get a home loan?
This change could mean that if you’ve been previously rejected for a home loan or had your borrowing power slashed due to a HECS debt, you might now qualify for a bigger loan – or finally get your first approval and get shopping.
If this sounds like you, and you're still keen on buying a home, it's definitely worth chatting with a mortgage broker.
But before you start celebrating, let’s see exactly how this plays out.
How will a HECS debt impact your borrowing power in 2025?
Until now, lenders had been treating HECS as if it were a credit card or personal loan. This is despite the fact that it’s interest-free and only kicks in once your taxable income is over a certain amount.
This meant that even borrowers with strong incomes and solid savings could see their borrowing power shrink by tens of thousands of dollars.
Here’s how it used to work:
Income | HECS repayment (monthly) | Borrowing power reduction |
$80,000 | $267 | $50,000 |
$150,000 | $1,250 | $90,000 - $130,000 |
Source: Internal Compare Club data
Starting in 2025, if you’re close to paying off your HECS debt, banks may ignore these repayments, significantly boosting your borrowing power.
What does this mean for first home buyers?
Removing a debt from your loan application gives you a higher chance of getting your loan approved, and your offer for your dream home perhaps being the winning one.
HECS repayments won’t be counted if your debt is nearly gone.
If your HECS balance is low, you could suddenly qualify for a larger loan.
Who benefits the most from this change?
Not everyone will get a free pass, but here’s who stands to gain the most:
Young professionals earning $100,000+ (doctors, engineers, IT professionals) who still have a HECS debt but solid income potential.
First home buyers earning $70,000 - $90,000 who previously got blocked by HECS repayment calculations.
Those close to paying off HECS (within 1-2 years) since lenders may completely ignore their remaining repayments.
Who may not benefit from the change?
Buyers with large HECS debts and lower incomes because banks might still count your repayments if they’re not close to being cleared.
Anyone more than five years away from clearing their HECS debt, as your repayments will still be factored into your home loan application.
Who’s eligible for this?
That’s a great question. There’s not much detail around this as yet. But if history is any guide, expect some classic price and income caps to crash the party, just like they often do for most first-home buyer schemes.
When does this change kick in?
At the time of writing, there’s no official start date – so don’t start drafting your end-of-lease email just yet.
The regulator, APRA, is gearing up for some serious talks to iron out the details. Stay tuned, because the mortgage world is about to get a shake-up!
Should you pay off your HECS debt before applying for a home loan?
The golden question: to pay or not to pay? This depends very much on where you're at financially. We can’t answer this as it’s different for everyone, but a single person who has just graduated and expects their salary to go up is in a different state to a couple with two kids looking to move out of a cramped apartment.
Ultimately, it’s what you feel best serves you financially in the near future. If you’re not sure, have a chat with a financial professional.
When paying off HECS can help you a lot:
Your HECS balance is under $5K and can be cleared within a year.
Paying it off significantly increases your borrowing power.
And when it doesn't help:
You’d have to dip into your home deposit savings.
Your HECS debt is still large and won’t be gone anytime soon.
Tip: HECS is interest-free, so keeping your cash for a home deposit can sometimes be a smarter financial move – again, something to chat to your mortgage broker about.
What can you do to maximise your borrowing power right now?
Check if your HECS debt qualifies for exclusion.
Log into MyGov and review your HECS balance (if it’s low, lenders may ignore it, making you one of the lucky ones).
Get pre-approved with a HECS-friendly lender because not all lenders will apply these rules the same way. Some could still count your HECS repayments when assessing your home loan application.
Speak to a knowledgeable mortgage broker about your options – especially if your HECS debt was previously a stumbling block to getting a home loan approved.
Access grants, incentives, and expert home loan advice – there is quite a bit of support for first home buyers and most of it is state-based.
💡 The income threshold for HECS repayments was increased in late 2024 – and it’s applied retrospectively – so check your HECS deduction by your employer is being applied correctly because this can also lift your borrowing capacity.
Be aware: HECS isn’t the only debt a lender will look at when you apply for a home loan. They’ll also look at what credit cards you hold – and how much you can spend on them – as well as BNPL, and other expenses like car or personal loans.
Bottom line
With borrowing power set to increase for many, the door to homeownership might be opening just a little wider this year. This change isn’t a magic bullet, but it could be the difference between renting forever and owning a home of your own sooner.
If you’re a first-home buyer with a HECS debt, now’s the time to get proactive.
Remember:
Review your HECS balance
Speak to a broker about lender policies
Start planning for 2025’s new lending rules.
Go deeper:
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
