HECS Debt Shake-Up: What It Means for Home-Buyers

A major win for students and future home-buyers: the federal government has officially passed legislation to wipe $3 billion in HECS debt, cutting the 2023 indexation from 7.1% down to 3.2%. This change is backdated to 1 June 2023, meaning more than 3 million Australians will benefit — especially younger Aussies juggling HECS repayments and saving for a home deposit.

So, what does this mean if you’re planning to buy a home?

Lower HECS Debt = Better Borrowing Power

Banks consider your existing debt when assessing home loan applications. A lower HECS balance could boost your borrowing capacity, improve your debt-to-income ratio, and reduce the financial pressure when applying for a mortgage.

Less Interest, More Savings

While technically not “interest”, HECS indexation adds to your debt each year based on inflation. With this change, you’re saving potentially thousands of dollars over time — money that could go towards your deposit, LMI, or moving costs.

Gen Z & Millennials Win Big

If you’ve been holding off on tackling your HECS debt in favour of saving for a home, this may offer some breathing room. With indexation slashed and future repayments expected to align more closely with wage growth, it’s a little win for long-term financial planning.

Quick Tip: If you’re planning to buy in the next 12 months, now’s a good time to review your credit score, savings, and HECS balance. Chat to a financial adviser or broker to see how this policy change could shift your home loan options.