When a bank assesses a home loan, it works out your surplus income after living costs and existing commitments. A HECS debt counts as a commitment: the lender deducts your compulsory repayment from the income it uses. Because that repayment rises with your income under the marginal system, higher earners feel it most.
For example, someone on a $100,000 repayment income has a compulsory HECS repayment of about $4,570 for 2026-27. A lender effectively assesses them as if they earned roughly that much less — which, run through a serviceability calculation, can trim the maximum loan by tens of thousands of dollars.
Small balance: if you can clear the debt entirely, the compulsory repayment disappears from your assessed commitments and your borrowing capacity can rise. This is the case where paying it off shortly before applying can make sense — but check first: under APRA's 2025 guidance a lender may already disregard a HELP debt that will be repaid within about 12 months, in which case paying it out early gains you nothing.
Large balance: partially paying down a big debt doesn't remove the repayment (you'll still owe it next year), so it does little for serviceability.
Every lender uses its own serviceability model, so the exact impact varies. A mortgage broker can show you the difference with and without the HECS repayment for a specific lender.
On the arithmetic alone, the comparison turns on indexation versus the return you assume, because the debt grows with indexation rather than interest. But borrowing capacity is the common exception: if a home purchase is near, the serviceability gain from clearing a small HECS balance can outweigh the investment maths. Decide with both effects in view.
Jason Jung builds and maintains HECS Check — the three calculators, the engine behind them and the writing. He's an independent web developer, not a tax agent or financial adviser, and the figures on this page are checked against the ATO sources cited below. How the site is checked · report an error.