HECS Debt Excluded From DTI: What This Means For You
20 Jun, 2025
Updated: 20 Jun, 2025
Big news for aspiring homeowners. The Australian Prudential Regulation Authority (APRA) has finalised guidance that could improve borrowing power of first-home buyers and young Australians with student debt.
From 30 September 2025, HECS/HELP debts will be excluded from the credit limit used to calculate a borrower’s Debt-To-Income Ratio (DTI), a move that could make home loans more accessible to thousands of Australians.
What’s Changing?
Under the new guidance, authorised deposit-taking institutions (ADIs) will no longer count HELP (HECS) debts when calculating how much other debt a borrower holds for DTI purposes.
Here’s a quick breakdown:
- HELP will be excluded from DTI calculations
- However, HELP repayments will still be considered in serviceability (since they reduce your take-home income)
- This will be implemented from 30 September 2025 onwards.
| Factor | Before APRA Update | After APRA Update (from 30 September 2025) |
|---|---|---|
| DTI Calculation | Included | Excluded |
| Serviceability Assessment | HECS repayments are deducted from your income | Still deducted (unless debt repaid in 12 months) |
| Borrowing Power Impact | Lower, due to reduced income and higher debt load | Still lower due to repayments, but DTI boost helps |
| Can lenders override HECS repayment? | Rarely or with strict criteria | Yes, if HECS is paid off within 12 months |
Why HECS matters: Even though it’s not a typical loan, lenders consider HECS repayments as money you can’t put toward your mortgage, reducing your borrowing capacity. APRA’s change makes the system fairer, but repayments still matter.
Expert Insight from Home Loan Experts
Sheng Ye, Mortgage Broker, says the update could be a game-changer.
“Treasurer Jim Chalmers wants to relieve the pressure from first-home buyers and help younger generations get into the property market more easily,” Ye said.
“Removing the HECS debt from loan servicing will cause a big improvement to young people’s borrowing capacity because many young borrowers do have HECS debt.”
This isn’t the first policy change that has led to lending reform. Sheng also noted that earlier this year, CBA amended its Modular Home credit policy following a government suggestion to ease construction lending for these properties.
What You Could Do Now
If you have HECS debt and are planning to apply for a home loan soon, here’s what we recommend:
- Don’t wait until September. CBA has already updated their assessment criteria before the official deadline.
- Talk to a mortgage broker to know which banks are already applying flexible student debt assessments.
- Get a clear picture of your borrowing power. You might be eligible to borrow more than you think.
