HECS-HELP debt is making it harder for graduates to get on the property ladder

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Updated 20/09/2022

Image: Shutterstock

A primary school degree is one of the cheapest degrees you can get in Australia at about $4K a year.

Image: Shutterstock

A primary school degree is one of the cheapest degrees you can get in Australia at about $4K a year.

Time to read : 3 Minutes

HECS Debt Is Making It Harder For Graduates To Get On The Property Ladder

Aspiring first home buyers have another roadblock to getting on the property ladder: student debt

  • In 2017 the government lifted student contributions for tertiary education costs, creating higher HECS or HELP debt for many Aussies seeking access to higher education. 

  • Previously HECS or HELP debt repayments didn’t kick in until the graduate’s earning power went above $52,000.

Enter APRA: In June the regulator formally told lenders to consider HECS/HELP debt when assessing home loan applications. Previously, it had been up to the lender to decide if they’d look at student debt.

HECS/HELP and home loans: how we got here

The HECS scheme was introduced in 1989, meaning higher education was no longer free. Successive governments deregulated these costs, meaning universities could set their own course fees - which, of course, they did.

  • Indexed Debt: HECS / HELP debts are not charged interest - but the amount owed is indexed for inflation, so the debt rises over time, like other costs of living – except wages.

  • In June 2022 inflation began climbing and HECS/HELP debt repayments went up by about 3.9%. 

  • That’s no small expense for a newly-qualified graduate in an entry-level role on around $65,000 per year but with an average university debt of $23,685.

  • To put that into context, a nursing degree costs up to $35K, an arts degree $43K and a medical degree will set you back about $255K. That is a lot of money to owe at the beginning of your earning life.

Be aware: The minimum income threshold for repaying HECS/HELP debts was lowered to $45,880 in 2019/20. Currently, about 2.9 million Australians owe a total of $68.7 billion in education debt.

“This move will reduce borrowing capacity for buyers even further, especially new buyers, as it increases their level of existing debt in the eyes of the lender.”

- Matt Gatt, GM Compare Club Home Loans speaking to Yahoo Finance in June.

What does this mean for graduates wanting to buy a property?

More students, owing more money for more courses - and with their HECS/HELP costs rising faster than their wages - makes for a lot of unsecured liabilities on a lot of first home buyer loan applications. 

  • Banks and lenders now consider Aussie university graduates a greater risk than they used to be. 

  • HECS/HELP debts are rising faster than the incomes these qualifications were designed to make possible. 

  • Tighter lending criteria – that includes taking into account HECS/HELP debts - are making it harder for some university graduates to qualify for home loans.

The bottom line

Hard-working young graduates are doing their best to achieve the Great Australian Dream of home ownership but that’s proving tricky in the current financial environment as they’re carrying higher debts than previous generations. 

Any good news? House prices are falling and Compare Club’s broker team are viewing it as a buyers market. Plus, some more boutique lenders may still have a higher risk appetite.

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.

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About the author

author Gillian Clive

Gillian Clive has worked in financial services for over two decades, including time at three of the big four banks, and as a finance broker. She has also worked as a product analyst for credit card and insurance services. In between creating content she writes books and promotes the message of financial literacy.


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