Major changes to HECS debt treatment for home loans

The federal government is making it easier for Australians with student debt to secure home loans by instructing financial regulators to update their guidance on HELP debt assessment.

Federal Treasurer Jim Chalmers has directed both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to revise how Higher Education Loan Program (HELP) debts are treated during mortgage applications. 

The changes aim to remove barriers for first-home buyers whose serviceability is currently reduced by student debt obligations.

Under current responsible lending rules, lenders must assess student debt in the same manner as other debts like credit cards or personal loans, despite the unique nature of HELP repayments which are only required when income exceeds certain thresholds.

"People with a HELP debt should be treated fairly when they want to buy a house, and we're working with the regulators to make sure they are," Mr Chalmers said.

ASIC has committed to quickly implementing changes to its guidance after consultation. The Treasury has confirmed that APRA will begin consultation on revising serviceability requirements and debt reporting related to HELP debts. 

“APRA expects an ADI [Authorised Deposit-taking Institution] to consider a borrower’s HELP debt obligations alongside other debt commitments when assessing their borrowing capacity,” APRA said.