HECS and Your Home Loan Borrowing Power: What Banks Actually Do
Your HELP debt reduces borrowing power through the monthly repayment deducted from your income, not through the balance itself. Since 2025 the rules have softened at the edges: a bank may set the repayments aside when compulsory repayments would clear the debt within about 12 months, and the balance no longer counts in your debt-to-income ratio at all.
HECS and your home loan at a glance
Checked against APRA and ASIC primary documents on 14 August 2026
- It is the repayment, not the balance: APRA's lending guidance treats HELP repayments as money deducted from gross income and not available to service a mortgage.
- The deduction is knowable to the dollar: on the 2026–27 scale a $100,000 income repays about $381 a month; the table below shows your level.
- Banks stress-test you: every new loan is assessed at the loan rate plus a buffer of at least 3 percentage points under APS 220.
- The 2025 softening is conditional: a bank may disregard HELP repayments where compulsory repayments would clear the debt within about 12 months, APRA's anchor for what it considers reasonable, and no lender is required to do it.
- Your DTI no longer includes HELP: since 30 September 2025 the balance is excluded from the ARS 223.0 debt-to-income definition, the measure the 1 February 2026 cap on high-DTI lending uses.
How banks test what you can borrow
A serviceability assessment is a stress test on your surplus income: what remains after tax, HECS, living expenses and existing commitments, tested at a rate well above the one you would actually pay. Two of its parameters are regulator-set and public; the assessment floor is each lender's own.
| Parameter | Current setting | Where it is printed |
|---|---|---|
| Serviceability buffer | At least 3.0 percentage points over the loan rate (APRA may vary it between 2.0 and 5.0); held again at the 28 May 2026 review | APS 220, Attachment C; restated in APG 223 |
| Interest-rate floor | No regulator floor since 5 July 2019; each bank sets its own. Across the market, new loans were tested at an average of about 8.7 per cent in the March 2026 quarter | APRA, July 2019; average from the March 2026 quarter statistics workbook |
| High debt-to-income lending | DTI of 6 or more is APRA's high-DTI line. From 1 February 2026, at most 20 per cent of each bank's new owner-occupier lending (and separately, investment lending) may sit at or above it. Bridging loans for owner-occupiers and loans to buy or build new dwellings sit outside the measure | APRA DTI limit activation; announced 27 November 2025 |
- What the buffer means in practice: a loan advertised at 6 per cent is assessed as if you paid 9. That single setting explains most of the gap between what online marketing calculators promise and what a bank approves.
- Six times income is a share limit, not your ceiling: APRA's cap restricts the share of each bank's new lending at or above 6 times income, not any individual loan. In the March 2026 quarter, 6.4 per cent of new loans sat at or above that line, per APRA's quarterly statistics.
Where HECS enters the assessment
APG 223 puts it plainly: banks should consider HELP obligations alongside other commitments because "HELP repayments are deducted from gross income and are not available to service a mortgage". The deduction is set by the ATO's repayment scale, so unlike your grocery bill it is knowable exactly.
| Repayment income | Annual HELP repayment | Monthly deduction | Share of income |
|---|---|---|---|
| $70,000 | $71 | $6 | 0.1% |
| $80,000 | $1,571 | $131 | 2.0% |
| $90,000 | $3,071 | $256 | 3.4% |
| $100,000 | $4,571 | $381 | 4.6% |
| $110,000 | $6,071 | $506 | 5.5% |
| $125,000 | $8,321 | $693 | 6.7% |
| $140,000 | $10,776 | $898 | 7.7% |
| $160,000 | $14,176 | $1,181 | 8.9% |
| $186,051 | $18,605 | $1,550 | 10.0% |
| $220,000 | $22,000 | $1,833 | 10.0% |
- Computed, not copied: these figures come from the same 2026–27 marginal scale that drives the HECS repayment calculator, at the ATO thresholds of $69,528 and $129,717 with the 10 per cent flat rate from $186,051.
- Repayment income is broader than salary: it is taxable income plus reportable fringe benefits, reportable super contributions, net investment losses and exempt foreign income. The HECS repayment calculator works yours out.
- What a deduction does to a loan, as plain arithmetic: a $381 monthly deduction, tested at the market-average 8.7 per cent assessment rate over a 30-year principal-and-interest term, is the repayment on roughly $49,000 of loan. That is illustrative arithmetic, not any lender's calculation.
- Salary packaging raises the deduction: repayment income adds back the grossed-up value of packaged benefits, so packaging increases the HELP repayment a bank sees. The mechanics are in the salary packaging guide.
What that means at each career stage
Anchoring the same scale to real award salaries from our verified pay dataset, the monthly deduction a bank subtracts from a doctor's income looks like this (base salary only; overtime and penalties push repayment income and the deduction higher).
| Career stage | Base salary across the states | Monthly HELP deduction |
|---|---|---|
| Intern | $80,638 to $97,036 | $139 to $344 |
| Resident, year 1 | $90,919 to $104,610 | $267 to $439 |
| Registrar, year 1 | $107,655 to $138,978 | $477 to $884 |
| Registrar, year 4 | $140,378 to $159,135 | $903 to $1,169 |
- Ranges reflect the states: the low and high ends are the lowest- and highest-paying state at that level in our dataset, the same figures as the state comparison. Model your own roster in the take-home pay calculator.
The 2025 and 2026 rule changes, dated and cited
A run of regulatory changes between February 2025 and February 2026 changed how HELP debt is treated, and most commentary blurs them together. Here is the sequence from the primary documents.
| Date | What happened | Source |
|---|---|---|
| 12 February 2025 | The Treasurer and ministers announce that APRA and ASIC will review the treatment of HELP debts in lending rules | Joint media release |
| 20 February 2025 | APRA opens consultation on removing HELP from debt-to-income reporting and allowing serviceability exemptions for near-term payoffs | APRA consultation |
| 6 March 2025 | ASIC adds paragraphs 209.68 and 209.69 to its responsible-lending guidance: lenders may weigh the time left on a HELP debt and, where appropriate, leave it out of a consumer's outgoings. This is what reaches non-bank lenders | ASIC news; RG 209 (March 2025 reissue) |
| 19 June 2025 | APRA finalises the APG 223 change: a bank may remove HELP repayments from an assessment where the debt is expected to clear within about 12 months through compulsory repayments. APRA kept the 12-month anchor after consultation, calling it a guide to what it considers reasonable rather than a hard rule | APRA response to consultation; APG 223 |
| 30 September 2025 | The reporting standard ARS 223.0 takes effect with HELP debt excluded from the debt-to-income definition entirely, on the basis that repayments are income-contingent | ARS 223.0 |
| 1 February 2026 | APRA's cap on high-DTI lending takes effect: at most 20 per cent of new owner-occupier lending (and separately, investment lending) at six times income or more, measured with the DTI definition in ARS 223.0, which has excluded HELP since 30 September 2025 | APRA DTI limit activation |
- The serviceability change and the DTI change are different sizes: the DTI exclusion covers every HELP debt, while the serviceability exclusion reaches only debts expected to clear within about 12 months. APRA's response letter confirms the two rules deliberately differ.
- Nothing is mandatory: both regulators frame the exclusions as discretion for the lender, and banks' individual credit policies on this are not published. Whether your lender applies them is a question for that lender or your broker.
Pay the debt out, or keep the deposit?
The classic pre-purchase question is a trade-off between the two limits a bank tests: paying HECS out lifts your monthly surplus, but the same dollars would otherwise sit in your deposit, which drives your loan-to-value position. These are the mechanics; what suits your situation is a decision for you and your own adviser.
| Paying the HELP debt out | Keeping the money as deposit | |
|---|---|---|
| Serviceability | Removes the monthly deduction from the assessment | Deduction stays until the debt clears (unless the 12-month discretion applies) |
| Deposit and LVR | Deposit shrinks by the payout amount, which can raise the loan-to-value ratio and change the position on lenders mortgage insurance (the premium charged on low-deposit loans) | Deposit stays intact |
| The near-payoff case | If the lender applies the APG 223 discretion to a debt that compulsory repayments would clear within about 12 months, the deduction is already out of the assessment, so a payout changes little. Whether a given lender applies it is not published | Where a lender applies the discretion, the deduction comes out without spending the deposit |
| Timing wrinkle | Indexation is applied each 1 June (2.8 per cent in 2026), so payout timing interacts with it; the HECS payoff calculator models this | Balance keeps indexing while it exists |
FAQ
Does HECS affect how much I can borrow for a home loan?
Yes. APRA's lending guidance (APG 223) says banks should consider HELP debt alongside other commitments because the repayments are deducted from your gross income and are not available to service a mortgage. At a repayment income of $100,000 that deduction is about $381 a month on the 2026–27 scale, and the bank tests your surplus at the loan rate plus a buffer of at least 3 percentage points.
Do banks still count HECS after the 2025 changes?
By default, yes. The June 2025 update to APG 223 lets a bank disregard your HELP repayments where compulsory repayments are expected to clear the debt within about 12 months, which APRA frames as its anchor for what is reasonable rather than a hard rule. ASIC's matching guidance for other lenders is similarly framed around the time left on the debt, and neither regulator requires any lender to apply the exclusion, so it is each lender's call.
Is HECS included in my debt-to-income ratio?
Not any more. APRA's reporting standard has excluded HELP debt from the debt-to-income definition since 30 September 2025, because repayments are income-contingent rather than a fixed debt. That matters more since 1 February 2026, when APRA capped high-DTI lending: banks can write at most 20 per cent of new mortgage lending at six times income or more, measured with the DTI definition in the reporting standard ARS 223.0, which leaves your HELP balance out.
Should I pay off my HECS before buying a house?
It is a trade-off between serviceability and deposit, and the answer depends on your numbers. Paying the debt out removes the monthly deduction from the bank's assessment, but it shrinks the deposit, which drives your loan-to-value ratio and mortgage insurance position. If compulsory repayments would clear the debt within about 12 months anyway, APRA's guidance already lets a bank set it aside, though no lender is required to apply that discretion. What suits your situation is a question for your own adviser or lender.
How much of my income goes to HECS repayments?
On the 2026–27 scale, nothing below $69,528, then 15 cents per dollar between $69,529 and $129,717, then 17 cents per dollar above that, until a flat 10 per cent of the whole repayment income applies from $186,051. A registrar on $130,000 repays about $9,076 a year, roughly $756 a month. The HECS repayment calculator models your exact figure, including salary packaging's add-back effect.
Work out your own numbers
Two calculators feed this decision: the HECS repayment calculator for your exact monthly deduction, including the salary-packaging add-back, and the take-home pay calculator for the income a lender starts from, state by state. To see the whole assessment with every lever visible, use the borrowing power explainer; for the wider HELP picture, start at the HECS guide for junior doctors.
Sources & methodology
Every regulatory claim on this page was checked against the regulator's own document on 14 August 2026, and repayment figures are computed at request time from the same verified 2026–27 parameters as the site's HECS calculators. This page is general information about published rules; it is not credit assistance, credit advice or financial advice, and it does not consider your circumstances.
- APRA Prudential Standard APS 220, Attachment C (the serviceability buffer)
- APRA Prudential Practice Guide APG 223, version effective 19 June 2025 (HELP treatment)
- APRA response to consultation on HELP debt obligations, 19 June 2025
- APRA macroprudential settings update, 28 May 2026
- APRA activation of debt-to-income limits, effective 1 February 2026
- APRA quarterly ADI property exposures statistics, March 2026 quarter
- ASIC update on student-loan treatment and Regulatory Guide 209 (March 2025 reissue)
- Treasury joint media release, 12 February 2025
- ATO study and training support loans rates and thresholds (2026–27 scale)
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