Student debt reform: what the 20% cut means for your borrowing capacity
The federal government has passed new legislation that cuts student loan (HELP/HECS) debts by 20% – a change that could help many buyers qualify for a home loan sooner.
Here’s what you need to know:
The Australian Taxation Office will retrospectively apply a once-off 20% reduction on HELP and other student loan debts, based on your balance as of 1 June 2025.
The annual increase to student debt (indexation) will now be capped at the lower of wage growth or inflation. This means your balance will only rise in line with income trends, not faster price growth.
As well as HECS-HELP, FEE-HELP, STARTUP-HELP, SA-Help and OS-Help, the changes will affect all of the following student loans: VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loan and Student Financial Supplement Scheme.
With a smaller debt load, lenders may view you as a lower-risk borrower, helping you qualify for a home loan sooner or borrow more to achieve your property goals.
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.