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Does HECS affect applying for a home?

Many people turn to a HECS-HELP debt to get them through university, and many may even forget about it once they have their degree. But when it comes time to apply for a home loan, having a HECS debt can weigh on how much you’re able to borrow and if your loan is approved at all. This is because having any outstanding debt affects your borrowing capacity. So even though it may be out of sight, out of mind - it can come into play when it comes time to buy a home.

What is HECS?

HECS or a HECS-HELP is a student loan program run by the Australian Government to help Australian university or higher-education students pay for their studies. A HECS-HELP loan can only be used to cover the cost of subjects and not things like accommodation, books, or any other study-related expenses.

There are a number of HELP loans that Australian students can apply for to help them cover their student fees:

  • HECS-HELP loan: You can apply for a HECS-HELP loan if you’re enrolled in a Commonwealth Supported Place (CSP) and still need to pay your fees

  • FEE-HELP loan: You can apply for FEE-HELP if you aren’t enrolled in a CSP, you are enrolled in a fee paying place

  • SA-HELP loan: You can apply for a SA-HELP loan if you need assistance paying for student services and amenities

  • OS-HELP loan: You can apply for an OS-HELP loan if you’re enrolled in a CSP and want help to cover the cost of studying overseas

How is your HECS loan repaid?

Once you reach the income threshold, your HECS-HELP repayments will be automatically factored into your wages and deducted by your employer. The compulsory repayment threshold is currently $47,014 for the 2021-22 income year, but it changes yearly. Even if you move overseas and earn over this threshold, you will be required to make your mandatory contributions to paying off your student debt.

How does a HECS debt affect your home loan application?

You will need to disclose your outstanding student loan on your application as it needs to be considered in your affordability assessment. Your lender will ask for your income and expenses, as well as your assets and liabilities. This, of course, includes your HECS-HELP loan or any other type of student loan.

You will need to prove that you can meet your ongoing HECS repayments as well as your home loan in order to receive approval. In this way, it is treated the same as any other type of debt like a personal loan or credit card. Your lender needs to decide whether the financial product is suitable for you, and in doing so, needs to account for your HECS debt.

How to check your HECS debt

There are a few ways you can see how much of your HECS debt is still outstanding. You can:

  • Log into your HECS-HELP portal

  • Log into your myGov account

  • Contact the ATO on 1300 650 225

Your outstanding HECS debt can change depending on how much you’ve paid off versus how much it has increased with in annual indexing. While you aren’t charged interest on a HECS-HELP loan, it will be adjusted to be in line with the Consumer Price Index (CPI) otherwise known as inflation. For example, the indexation rate was 0.6% in 2021, but it was as high as 1.8% in 2020 and 2019.

Before you apply for a home loan, it can be helpful to know what your current HECS-HELP debt is. Since it will be factored into your borrowing power, it may be helpful to pay more off it off/pay it off in full, save up a bigger deposit so you can apply for less, or opt for a cheaper home.

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Other helpful resources:

Your Guide to Buying Your First Home
How long does it take to get a home loan approval?
Our home loan process

About the article

As Australia's leading online lender, has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.