Australia has over 2.9 million people with outstanding HECS-HELP (Higher Education Loan Program) debt, totalling over $78 billion. While HECS-HELP is not a traditional loan — it has no interest rate, no credit reporting, and repayments are income-contingent through the tax system — it directly reduces your borrowing power when applying for a home loan. Every lender factors your HELP repayment obligation into their serviceability assessment, treating it as an ongoing expense that reduces the income available for mortgage repayments. This guide explains exactly how much it costs you in borrowing capacity and whether paying it off early makes financial sense.
How Do Lenders Assess HECS-HELP When You Apply for a Home Loan?
HECS-HELP debt does not appear on your credit report — lenders cannot see your balance through standard credit checks. Instead, lenders rely on you to disclose your HELP debt balance in the application (it is a mandatory disclosure), and they calculate the annual repayment obligation based on the current ATO repayment thresholds.
HECS-HELP repayments are made through the tax system — your employer withholds an additional amount from your salary based on your income level. The repayment rate increases with income:
As of 2025–2026, the HELP repayment thresholds are approximately: $54,435–$60,739 = 1.0% of total income. $60,740–$64,307 = 2.0%. $64,308–$67,904 = 2.5%. Rates continue increasing in steps up to 10% for incomes above $151,201.
Lenders treat this compulsory repayment as a non-discretionary expense — it reduces the income available for mortgage serviceability. For someone earning $95,000 with a HELP debt, the annual HELP repayment is approximately $5,700 (6.0% of income). The lender deducts this from gross income before calculating borrowing capacity.
Critically, lenders assess the repayment based on your income at the assessed rate (including the APRA 3% buffer rate), not your current income. This means the HELP repayment percentage applied may be higher than what you are actually paying — because the lender models a higher income scenario to stress-test affordability.
Some lenders calculate the HELP repayment on the declared debt balance (applying the applicable percentage rate to your income), while others use a simplified approach (e.g., assuming a flat 3–4% of income). The methodology varies between lenders — which is why the same borrower can have different borrowing capacity at different lenders.
HECS-HELP Is Not on Your Credit Report
Unlike credit cards, personal loans, and BNPL, HECS-HELP debt does not appear on your credit report and is not reported to credit bureaus. Lenders rely on your voluntary disclosure. However, they verify it through your tax return or payslip (which shows the HELP withholding amount). Never fail to disclose your HELP debt — providing false information in a loan application is a serious offence.
| Income Range (2025–26) | HELP Repayment Rate | Annual Repayment |
|---|---|---|
| Below $54,435 | 0% (no repayment) | $0 |
| $54,435–$60,739 | 1.0% | $544–$607 |
| $60,740–$64,307 | 2.0% | $1,215–$1,286 |
| $64,308–$67,904 | 2.5% | $1,608–$1,698 |
| $67,905–$72,620 | 3.0% | $2,037–$2,179 |
| $72,621–$78,464 | 3.5% | $2,542–$2,746 |
| $78,465–$85,479 | 4.0% | $3,139–$3,419 |
| $85,480–$95,000 | 4.5% | $3,847–$4,275 |
| $95,001–$110,000 | 5.0% | $4,750–$5,500 |
| $110,001–$130,000 | 6.0% | $6,600–$7,800 |
| $130,001–$151,200 | 7.0% | $9,100–$10,584 |
| Above $151,201 | 8.0–10.0% | Varies |
How Much Does HECS-HELP Actually Reduce Your Borrowing Power?
The impact is significant — and often underestimated. Here are worked examples based on a single borrower with standard living expenses, applying for an owner-occupied P&I variable rate loan at 6.5% (assessed at 9.5% with the APRA buffer):
Scenario 1 — Income $85,000, HELP debt $25,000: Without HELP: approximate borrowing power $480,000. With HELP: annual repayment $3,825 (4.5% of income). Borrowing power reduces to approximately $425,000. Reduction: approximately $55,000 (11.5%).
Scenario 2 — Income $100,000, HELP debt $40,000: Without HELP: approximate borrowing power $570,000. With HELP: annual repayment $5,500 (5.5% of income). Borrowing power reduces to approximately $490,000. Reduction: approximately $80,000 (14.0%).
Scenario 3 — Income $120,000, HELP debt $60,000: Without HELP: approximate borrowing power $700,000. With HELP: annual repayment $7,200 (6.0% of income). Borrowing power reduces to approximately $595,000. Reduction: approximately $105,000 (15.0%).
For couples where both partners have HELP debt, the combined impact can be $100,000–$200,000+ in reduced borrowing capacity — a material difference in many Australian property markets.
The key takeaway: HELP debt reduces borrowing power by approximately $6–$8 for every $1 of annual HELP repayment. A $5,000 annual HELP repayment reduces capacity by approximately $30,000–$40,000.
$40,000 HELP Debt = $80,000 Less Borrowing Power
On a $100,000 income, a $40,000 HELP debt triggers approximately $5,500/year in compulsory repayments — reducing your borrowing power by approximately $80,000. For a couple with combined HELP debts of $80,000, the reduction can exceed $150,000. Factor this into your property search budget.
Should You Pay Off Your HECS-HELP Before Applying for a Home Loan?
This is one of the most commonly asked questions by first home buyers with HELP debt. The answer depends on your specific circumstances.
Arguments for paying off HELP early:
If paying off your HELP debt would increase your borrowing power enough to purchase the property you want, and you have the savings to do it without depleting your deposit, it may be worthwhile. For example, if you have $70,000 in savings, a $20,000 HELP debt, and need $60,000 for a deposit — paying off the $20,000 HELP debt leaves you with $50,000 (less deposit) but increases your borrowing power by $30,000–$40,000.
Arguments against paying off HELP early:
HECS-HELP is indexed to CPI (not a commercial interest rate) — making it the cheapest debt most Australians will ever hold. In 2024–2025, the indexation rate was 4.7%. In most years, it is 2–3%. By contrast, home loan interest is 6–7%. Every dollar used to pay off HELP instead of going toward your deposit costs you more in mortgage interest than you save in HELP indexation.
Additionally, if paying off HELP depletes your deposit below 20%, you trigger LMI — which can cost $10,000–$30,000 and completely offset the borrowing power benefit.
The optimal strategy for most borrowers:
Do not pay off HELP at the expense of your deposit. Instead: maintain the largest deposit possible (targeting 20% to avoid LMI), keep your HELP debt and make compulsory repayments through the tax system, and work with your broker to find lenders whose HELP assessment methodology maximises your borrowing power.
Some lenders are more generous than others in how they assess HELP debt. Your broker can identify lenders that calculate the lowest HELP repayment impact — potentially gaining you $20,000–$40,000 in additional borrowing capacity without paying down the HELP balance.
If your HELP debt is small (under $10,000) and paying it off would not reduce your deposit below 20%, it may be worth eliminating it for simplicity and a modest borrowing power boost.
Keep Your Deposit — HECS Is Your Cheapest Debt
HECS-HELP is indexed to CPI (typically 2–4%), not a commercial interest rate. Your home loan charges 6–7%. Using $20,000 to pay off HELP instead of contributing to your deposit means you borrow an extra $20,000 at 6.5% — costing $1,300/year — while only saving $400–$800/year in HELP indexation. Keep the deposit and let HELP repay through the tax system.
- ✓HECS-HELP is indexed to CPI — the cheapest debt you will ever hold
- ✓Paying off HELP at the expense of deposit is usually counterproductive
- ✓LMI triggered by a smaller deposit often exceeds HELP benefits
- ✓Different lenders assess HELP differently — broker can maximise capacity
- ✓Small HELP balances (under $10K) may be worth paying off for simplicity
- ✓Never voluntarily repay HELP if it pushes your deposit below 20%
- ✓Couple with combined HELP: the impact on borrowing is compounded
Frequently Asked Questions
About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.