Impact of Hecs on borrowing capacity

Impact of Hecs on borrowing capacity: No doubt HECS-HELP (Higher Education Contribution Scheme- Higher Education loan program) has provided multiple loan programs to the students who want to pursue their higher education in Australia but can such debts and loans affect your chances for home loans?

For those who don’t know, there are some cover payments in universities which are paid by the students themselves, like books, accommodation payments and dormitory’s supplies. These amounts are known as student contribution amounts. The rest of the dues are paid by the federal system of Australia. 

So, the student contribution amount must be paid by the students and if they can’t afford due to some financial conditions, HECS-HELP loans allow them to pay such contributions.

Now, let’s get into the details about borrowing power and the impact of HECs on it.

Is HECS a personal loan or help loan?

A lot of you asked us about this question as a lot of confusion has erupted in this matter. However, HEC is divided into two components; student loan and student scholarship. If a student is eligible for HEC loan, then the Australian government via HECS-HELP scheme pays the asked loan directly to the institution instead of giving it personally.

However, only those students can apply for this loan who are registered or enrolled in a commonwealth supported place (CSP).

Also, HEC is not a personal loan, it is a student loan or one can say help loan as well. Additionally, such loans are interest free and one can pay off it once he earns a certain level of income (which we will be discussing in next sections).

Impact of Hecs on borrowing capacity
Impact of Hecs on borrowing capacity

How much HECS Loan can I borrow?

Well, the limit depends upon your previous loan records from HEC. The limit of debts depends upon the previous loans from FEE-HELP, VET FEE-HELP from the Australian government. One can check the loan limit from myGov app or from the official website of ATO (Australian tax office).

For precise information, you need to know about the borrowing power and its impact on taking loans from HECS.

Let’s have a look into it…!

How much does HECs affect borrowing power?

When you apply for borrowing money, a lender will look upon your borrowing capacity or borrowing power. Also, your borrowing capacity depends upon your income, car loans, credit cards and personal loans.

Before we get into the details, let’s get into the details about what borrowing power is.

Impact of Hecs on borrowing capacity
Impact of Hecs on borrowing capacity

What is borrowing power?

Borrowing power or capacity is the amount a lender can lend you depending upon your financial conditions and your income. The more debt you owe (any kind of debt), the low borrowing power would be. 

Another important factor which affects the borrowing capacity is your monthly income and previous loans as a certain amount is deducted from your income automatically if you have any debt.  

The lower the liabilities, the higher chances of getting a home loan easily. The liabilities include;

  • Personal loans.
  • Car loans.
  • Credit cards.
  • Higher education debt.
  • Dependent children.

When you apply for the loan, the lender will look upon these liabilities and if your income is getting deducted more than half, then getting further loan would be difficult. However, if the case is opposite, then the lender will lend you money as per your demand.

The home loan depends upon your home size and the lender will deal with you accordingly.

Does HEC debt affect credit score?

On a lighter note, there is no negative affect on your credit score if you have HECS-HELP debt. However, it might affect your borrowing capacity or power. The larger you owe a debt in Australia, the lower amount you can borrow further. 

Impact of Hecs on borrowing capacity
Impact of Hecs on borrowing capacity

How to pay off HECs or mortgages?

Now one of the most important questions arises is how one can pay the HECs debt, what would be the process. Don’t worry, we have got you covered as well.

If you are earning less than $48,361 monthly, then you are not eligible to pay your debt. Once you start earning above this threshold, then your income (part of it) would be automatically deducted for HECS debt.

Furthermore, there is another option one can avail if he/she has enough income or has some savings.

Apply for additional payments

You can pay off your HECS-HELP debt quickly via myGov application. You can pay directly via credit card or bank transfer to the ATO through this app. 

If you earn more than the threshold value (which we have mentioned above) and less than $55,000 then 1% HECS-HELP debt will be deducted from your account automatically.

How to apply for a HEC loan?

If you are wondering about how to apply for HEC loan or from where to get start, have a look at the steps mentioned below;

  • Your TFN (tax file number) or a certificate for application of TFN.
  • You must be enrolled in the Commonwealth support. And, you will be needing a request from the commonwealth support form. This form can only be given to you by your university or any higher education  provider.
  • Your Unique student Identifier (USI, which is a government authenticated record for every student) must be submitted before the census date.

Only these certificates and forms need to be submitted for filing for a HEC-HELP loan. Apart from that, one can only apply once in the meantime of one’s courses. 

SIDE NOTE:  Once you have applied for the loan, consult your provider after some time to know about the approval.


HECS-HELP calculators are available on multiple official sites of the Australian government from where you can check your borrowing capacity, your debt percentage according to your income to debt ratio.

  • By not spending your money on luxury items or unnecessarily. 
  • Through extra repayments, you can enhance your borrowing capacity.
  • When you are in the process of getting a mortgage, make sure to be honest with the dealer about how much debt you can afford and how you will pay it.

NO! HECS-HELP loan is interest free. However, as the cost of living and inflation have skyrocketed in the past few years, around 4% indexation factor is applied annually. 


To pen off, the higher your HEC debt would be, the lower your borrowing capacity or power would be. Furthermore, you can only apply once for HECS loan amidst your courses. Your HECS-HELP loans might affect your application for a Home loan if your previous debts are more and your income is less.

So, it is important to know about the impact of HECS on borrowing capacity especially if you are planning for a home loan. We hope that this piece of information has helped you understand the topic clearly. 

Still, if you want to know more about the HEC-HELP program and how this whole process works, then let us know. Also, if you need any assistance regarding HEC-HELP, we would be delighted to help you.

Read Our Some Of Previous Articles:
(Fringe Benefits Tax)
(Tax Deductions Australia)
(Super Fund Complaints)
(Common Tax Return Mistakes)

Information and statistics for This Post provided by My Tax Daily.