New HECS rules put more cash in borrowers’ pockets and lift home loan capacity
A major change to the way HECS is repaid has put more money in borrowers’ pockets — and could lift borrowing capacity by tens of thousands.
From September 2025, HECS repayments are now based on marginal income rates, with the repayment threshold lifted from $54,435 to $67,000. That means many borrowers will pay less towards their student debt and keep more of their income.
For example, someone earning $70,000 will now pay about $50 less per fortnight. At an income of $85,000, annual repayments drop from around $3,400 to $2,700.
Because lenders include HECS repayments when calculating how much you can borrow, this change could increase your borrowing power by up to $30,000, depending on your income and circumstances.
This comes on top of recent bank policy changes, which allow lenders to ignore HECS debt under certain conditions — such as if it's due to be paid off within a year, or if it’s under $20,000.
Combined with the 20% HECS debt reduction for loans held as of 1 June 2025, this is great news for anyone hoping to buy a home while still carrying student debt.
About the author – Alex Veljancevski is a Sydney Mortgage Broker with Eventus Financial, which assists first home buyers, investors, upgraders and borrowers seeking to refinance to a better deal on their home loan.