For years, many Australians with a HELP (formerly HCS) debt have found their dreams of homeownership held back. The student loan, while essential for education, often acted as a significant drag on borrowing power, reducing the maximum loan amount lenders were willing to offer.

However, changes introduced in early 2025 have rewritten the rules. Lenders now have more flexibility in how they assess HELP debt, and as we move through the latter half of the year, we’re seeing these changes make a real difference for thousands of aspiring homeowners.

If you have a HELP debt and are looking to enter the property market, this is a must-read. We’ll explain what’s changed, how it’s shaping borrowing trends, and what steps you can take to make the most of this new environment.

Key Takeaways

• New Guidance for HELP debts: In early 2025, financial regulators allowed lenders to take a more flexible approach to HELP debt in mortgage applications.
• Borrowing Power Boost: If your HELP debt is small or will be paid off soon, lenders may now reduce or completely ignore its impact on your serviceability, which may increase borrowing capacity by tens of thousands of dollars.
• Lender Policies Vary: Not all banks apply the new rules in the same way. Some exclude HELP debt under a certain threshold (e.g., $20,000), while others focus on the repayment timeline.
• Timing is Key: Borrowers are now strategically timing their applications to coincide with their HELP debt falling into the “near-term” payoff window to maximise their capacity.
• Expert Guidance is Crucial: Navigating these new policies requires expert knowledge. A mortgage broker can compare lenders to find the one whose policy best suits your situation.

What Changed in Early 2025?

In early 2025, regulators provided updated guidance that gives lenders more flexibility in how they assess HELP debt within standard credit assessments. Importantly, Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) did not institute formal regulation or a mandated rule change, rather their guidance clarified how HELP debts can be treated under responsible lending and serviceability assessments, allowing lenders to adopt their own internal policies.

Until 2025, there was no specific regulatory position on how lenders should assess HELP debt. Most treated it as a fixed, ongoing liability within standard serviceability formulas.

This year’s guidance doesn’t require lenders to change their approach, but it allows for more discretion in how HELP debt is factored into assessments.

The new guidance allows lenders to disregard or reduce the impact of HELP repayments when assessing a borrower’s ability to service a loan, provided the debt will be cleared in the near term.

This has led to some lenders updating their policies, which generally fall into three categories:

1. Balance-Based Exclusion: Some lenders will now completely ignore a HELP debt if the outstanding balance is below a set amount, such as $20,000.
2. Timeline-Based Exclusion: Others will exclude the debt from serviceability calculations if official records show it is scheduled to be fully repaid within the next 12 months.
3. Reduced Assessment: For debts that will be cleared in the medium term (e.g., one to five years), some banks may apply a reduced expense amount rather than the full compulsory repayment figure.

Commonwealth Bank announced that it will no longer consider HELP debt if it is to be repaid within 12 months.

NAB will no longer factor student debts of $20,000 or less when assessing an applicant’s borrowing power. More lenders are expected to follow suit in the coming months.

It’s important to remember that these policies are not uniform across the industry and are still evolving. This is where the guidance of a local expert you can trust becomes invaluable.

How Lenders Used to Treat HELP vs. Now

To understand the significance of this shift, let’s compare the old way with the new.

Before 2025:

• Lenders would take your gross annual income and apply the relevant ATO compulsory HELP repayment percentage to calculate an annual expense.
• This expense was deducted from your usable income before your borrowing capacity was calculated.
• This happened even if you only had $5,000 left on your loan. The formula was rigid and didn’t account for the debt’s imminent disappearance.

How much can I borrow?

Use our home loan borrowing calculator to estimate how much you can afford to borrow.

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Now, in Late 2025:

• Lenders will look at your actual HELP balance and projected payoff timeline.
• If your profile fits their specific criteria, the associated expense may be partially or completely removed from the serviceability calculation.
• This frees up more of your income to be put towards servicing a home loan, directly increasing your maximum borrowing power.

Why this gets frustrating for borrowers

Your income matters more than the total balance of your HELP debt

When lenders review your HELP debt, what matters most is the annual compulsory repayment amount that’s calculated from your taxable income, not the size of your HELP or HECS balance.

This amount is set using ATO income bands, meaning the repayment is a fixed percentage of your salary each year.

This means two borrowers who earn the same income but have very different HELP balances (for example, one with $20,000 left and the other with $80,000) will often see the same annual HELP repayment counted as an expense for borrowing purposes.

For instance, if both Sam and Alex earn $90,000, it doesn’t matter if Sam owes $15,000 and Alex owes $60,000, the lender typically assesses the same HELP repayment amount for each when calculating how much they can borrow.

Under the new rules, the outstanding balance only comes into play if your HELP debt is nearly cleared, when new rules may allow some lenders to exclude or reduce that expense.

With the 2025 updates, if your HELP balance is low or expected to be cleared soon, some banks may ignore or reduce your HELP repayment as an ongoing expense. This can lift your borrowing power without needing to pay off your HELP debt upfront.

Repayment rates and income thresholds are set by the ATO and may change from year to year.

Your Checklist

To make the most of these changes, get prepared.

1. Check Your HELP Balance: Log in to myGov and download your latest ATO statement.
2. Estimate Your Payoff Window: See how quickly your compulsory repayments are reducing the balance.
3. Gather Your Documents: Get your recent payslips and tax returns in order.
4. Reduce Other Liabilities: Pay down high-interest debts like credit cards and consider lowering credit limits you don’t use.
5. Talk to a Broker: This is the most critical step. Ask them to model your borrowing capacity with multiple lenders to see who offers the best outcome under the new rules.

Have questions that you need answered? Contact our Export Mortgage Brokers today to explore your options.

Disclaimer:

The information is provided by Yellow Brick Road Finance Pty. Limited ACN 128 708 109 Australian Credit Licence 393195 and does not take your personal objectives, financial situation or needs into account. Consider its appropriateness to these factors before deciding whether to act on it.