Guides
Does HECS debt affect borrowing power? Yes. Lenders treat the compulsory HECS-HELP repayment taken from your pay as a commitment, which lowers the surplus income they use to test whether you can afford a home loan. The effect is usually smaller than a credit card or car loan, but it is real, and it grows with your income.
Quick answer: HECS-HELP debt reduces borrowing power because lenders deduct your annual compulsory repayment from the income they assess. On an illustrative $120,000 income, the repayment is about $631 a month and could trim capacity by roughly $75,000. The size of the hit depends on your income and on the lender, so it pays to compare policies before you apply.
HECS-HELP does not behave like an ordinary loan. It does not appear on your credit report, there is no monthly statement, and repayments come out through the tax system rather than a bank account. Lenders still care about it, because the repayment reduces your take-home pay for as long as the debt exists.
When a lender assesses your application, it works out your net income, subtracts your living expenses and your existing commitments, and tests whether what remains can cover the proposed loan at a higher rate than you will actually pay. APRA, the prudential regulator, kept its serviceability buffer at 3 percentage points in its review published on 28 May 2026, so a loan priced at 6.5 per cent is tested at 9.5 per cent. The compulsory HECS repayment is counted as one of those commitments.
Two practical points follow. First, the debt balance itself matters much less than the repayment it triggers. A $20,000 balance and a $60,000 balance can produce the same repayment if your income is the same. Second, because the repayment is a percentage of income rather than a fixed amount, a pay rise increases both your borrowing power and the HECS deduction, so the two partly offset each other.
Repayments are based on your repayment income and a marginal rate. For 2026-27, sources reporting the ATO thresholds put the minimum at $69,528, with 15 cents in each dollar above that up to $129,717, then $9,028.35 plus 17 cents in each dollar up to $186,050. Check the current table on the Australian Taxation Office website before relying on these figures, because thresholds are updated each year.
The table below is illustrative only. It applies those marginal rates to a single income, then divides the monthly repayment by the repayment factor for a 30-year loan assessed at 9.5 per cent (about $0.0084 a month per dollar borrowed). It assumes the lender subtracts the full repayment from your surplus and ignores everything else, so real results will differ.
| Annual income | Annual HECS repayment | Monthly repayment | Illustrative reduction in borrowing capacity |
|---|---|---|---|
| $70,000 | $71 | $6 | about $700 |
| $90,000 | $3,071 | $256 | about $30,400 |
| $100,000 | $4,571 | $381 | about $45,300 |
| $120,000 | $7,571 | $631 | about $75,000 |
| $150,000 | $12,476 | $1,040 | about $123,600 |
Broker and lender comparisons have found the effect can be material, in some scenarios up to around 20 per cent of borrowing capacity depending on the lender. That range is a reminder that the figures above are a guide, not a quote. If you want to see how your own income and debts play out, our guide on how much you can borrow on a $100k salary walks through the other inputs lenders weigh.
There is no single national rule for how HECS is counted, which is why two lenders can assess the same borrower quite differently. Differences usually come from three places.
This is one of the clearest cases where lender selection changes the result. A lender with a tougher HECS policy might cap you well below another lender whose policy is more flexible, on identical paperwork. Our broader explainer on borrowing power and the serviceability buffer covers how those assessment rates feed into the final number.
You cannot change the rules, but you can change how your application presents. These are the levers worth considering, roughly in order of impact.
Each full application leaves an enquiry on your credit file, so it helps to know which lender treats HECS most favourably before anything is lodged. A broker can check policies across the panel without a credit enquiry for each one.
If your balance is small, clearing it can remove the commitment entirely, and some lenders will also ease the assessment as it approaches zero. Whether that is smart depends on what else the money could do. Using savings you need for your deposit or buffer to clear a low-interest debt can leave you worse off. HECS-HELP debt carries indexation rather than a commercial interest rate, so there is no automatic case for rushing it.
Credit card limits are assessed on the limit, not the balance, so cancelling unused cards often lifts capacity by more than any HECS manoeuvre. Our guide to debt consolidation covers when restructuring existing debts makes sense.
A partner's income is assessed alongside yours, and their own HECS balance, if they have one, is assessed too. The combined position is what counts.
Do not stop repaying or avoid declaring your debt. Lenders ask about HECS-HELP, and your repayments appear on your tax and payment records. Leaving it out of an application can lead to a declined loan or a misrepresentation problem later.
For first home buyers, HECS is rarely the deciding factor on its own. Deposit size, savings history and living expenses usually matter more. The more useful question is whether HECS tips you under the amount you need for a particular property. If it does, comparing lenders is normally the fastest fix. Our free tools and calculators help you sketch repayments, and the rate check shows how your current or proposed rate compares with the market.
Michael and the team at Mankin Finance work with borrowers carrying HECS balances across every state and territory, and the pattern is consistent: the same income and the same debt can produce meaningfully different approvals depending on which lender sees the application first.
Tell us your income, commitments and HECS balance and we will check which lenders treat it most favourably.
No. HECS-HELP debt is not reported to credit bureaus, so it does not lower your credit score. It does affect how lenders assess your repayment capacity, which is a separate test from your credit history.
Most do. Lenders generally include the compulsory repayment based on your income as a commitment when testing whether you can afford the loan. Some will ease or exclude the repayment where the balance is close to being repaid, but the policy varies by lender.
Not automatically. Clearing a small balance may lift borrowing power, but using up your deposit or emergency savings to do it can backfire. It depends on your balance, your income and the lender you are likely to use, so run the numbers first.
It varies with income and lender. On illustrative figures, a $90,000 income might lose about $30,000 of capacity and a $120,000 income about $75,000, because the repayment rises with income. Broker comparisons have found larger effects in some scenarios, so treat any figure as a guide.
Yes. Many borrowers with large HECS balances are approved. The repayment, not the balance, drives the assessment, and choosing a lender with a sensible HECS policy can make the difference between a decline and an approval.
Disclaimer: This article is general information only and does not constitute financial, mortgage, or credit advice. Worked examples are illustrative, use the stated assumptions, and do not reflect any lender's actual assessment. Thresholds and policies change, so confirm current details with the Australian Taxation Office and your lender. Before making decisions, speak with a qualified mortgage broker or financial adviser who can assess your circumstances. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
Book a call on +61 420 699 983 or apply online. We will compare lender HECS policies against your numbers and show you where you stand. Our clients have left 140+ five-star Google reviews.
Book a free callSources: Australian Prudential Regulation Authority (macroprudential settings review, 28 May 2026); Australian Taxation Office study and training loan repayment thresholds as reported by industry sources; lender and broker guides on HECS treatment (NAB, Aussie, Unloan, Compare Club). Check each source for current figures. See also our FAQ.