Latest news with #HigherEducationLoanProgram
7NEWS
5 days ago
- Business
- 7NEWS
How HECS debt changes impact Aussie homebuyers
The Government's major student debt reforms have officially passed the Senate - once signed off by the Governor General, it will wipe billions of debt off the table. This will be very welcome news for the three million people who currently have a HELP/HECS loan. But while the financial relief is a good thing, the question on many people's minds is: Will this help me get into the property market sooner? Whether you are trying to buy your first home, strengthen your borrowing capacity, or even just make room in the budget to invest - these changes could shift the landscape in more ways than one. What are the changes? Key details: A one-off 20 percent reduction to all outstanding Higher Education Loan Program (HELP/HECS) and student loan balances (seeing the average HECS holder get $5,500 slashed off their debt). It will be backdated to the value of the debt prior to the 1 June indexation increase. New changes to income repayment bands and amounts. Last year, we saw an amendment to the indexation rule. Indexation is now based on either: the Wage Price Index (WPI), or the Consumer Price Index (CPI) - whichever is the lower. This means debt will no longer be indexed at inflationary highs like we saw in 2023 (when the indexation rate hit 7.1 percent!). In 2025, indexation is set at 3.2 percent. Together, these changes will remove nearly $20 billion in student debt. The 20 percent discount alone will apply automatically to more than three million Aussies. They have also changed how repayments are calculated. Previously, if you earned under $54, 435 - you were not required to start paying back your debt (although indexation is still added to it!), they have now increased the income threshold to $67,000. This adjustment could result in smaller regular repayments to HECS and more take-home pay. Whilst this looks to help give more money in people's pockets, it will likely see you take longer to pay off the debt and thus increase the amount of overall indexation (aka cost) to you as a HECS holder over the life of that debt. What does it look like in practice? For example, someone earning $100,000 a year, with a HECS balance of $37,500 would see their debt reduced to $30,000 with the new 20 percent discount. After the 3.2 percent indexation is applied on 1 June 2025, their new balance would become $30,960. This is a clear win on both the overall reduction and the lower indexation amount, compared to previous years. And for someone entering or already navigating the property market, it may have some flow-on effects worth considering. So, does it improve borrowing power? We asked Chris Bates, Mortgage Broker and Founder of Alcove, how these changes might affect first-home buyers and their ability to borrow. "As the repayment is based on a percentage of income, this does not increase capacity," he explained. That might be surprising to some. While it is easy to assume a smaller debt means better loan approval odds, the reality is a bit more nuanced. Because compulsory HECS repayments are tied to income rather than loan size, a 20 percent reduction in balance doesn't immediately boost borrowing capacity in most cases. Still, Chris believes the perception of relief could influence buyer behaviour. "If it becomes widespread that banks will not need to include HECS for first home buyers, then yes, they will spend it on property as they are currently spending every dollar they can get due to tight borrowing capacity." In other words, even if the numbers on paper do not move much, confidence might. And with some banks already reviewing how student debt affects serviceability assessments, we may see lenders updating their credit policies in time to increase overall borrowing capacity if someone is close to paying off their student debt. The emotional impact Beyond the technicalities of loan servicing calculators, there is a psychological shift happening too. For many Australians, HECS debt has long been a background burden. It quietly erodes pay packets, grows through indexation and delays financial progress. Reducing it by 20 percent overnight is not just a financial change, it's an emotional one. That sense of relief can fuel new decisions. The confidence to start saving for a deposit, to apply for a pre-approval or to see yourself as a buyer instead of just a renter. And that matters. Because mindset is a critical factor in long-term financial growth. What you can do next Whether you are actively saving for a home or just reassessing your financial priorities, here are three practical steps to take now: Revisit your budget and cash flow: With a lower HECS balance and potentially reduced repayments, look at how much extra you can now set aside monthly. This could go towards your deposit, mortgage repayments, or other financial goals. Speak to a mortgage broker: Not all lenders treat HECS debt the same way. Some may take a more generous view of reduced student debt than others (especially if you are close to having it paid off!). A broker can help assess your updated position and match you with a lender that fits your circumstances. Get your pre-approval documents in order: If a property purchase is on the cards in the next 6 to 12 months, use this moment to get financially ready. Check your credit score, reduce other debts if possible and make sure your savings patterns support your loan application. What if you aren't buying yet? Even if a property purchase is not on your immediate horizon, there are still smart ways to make the most of these changes. Top up your repayments: Clearing your HECS balance faster can free up your borrowing power in the future and remove a mental roadblock to other financial goals (generally this is a decision on if you want to bank it to have a higher deposit, or pay your HECS down to increase your borrowing capacity). Redirect savings: With smaller compulsory repayments, you might be able to direct more funds into your emergency savings, deposit goal, superannuation or other investments (or use it to get your HECS paid off faster). Strengthen your financial foundation: Use the extra breathing room to reduce credit card debt, build better money habits or set goals that align with your future plans. Could this push prices higher? It is a fair question, especially in a market where prices have already been climbing despite high interest rates and inflation pressures. According to Chris Bates, if the changes give first-home buyers more spending confidence and banks become more lenient around HECS debts, then yes, it could add fuel to the fire. "They are currently spending every dollar they can get," Chris said. "If HECS becomes less of a factor, they will spend that on property." This could be particularly relevant in more affordable markets where even small shifts in borrowing power or sentiment drive competitive activity. But it is also worth noting that while the changes are helpful, they are not transformational for every buyer. The real impact may depend on how lenders respond in the coming months and whether further reforms are introduced. A step in the right direction There is no silver bullet to solving Australia's housing affordability crisis. And student debt relief alone is not going to unlock the door to home ownership for everyone in a market that continues to rise. But this is a meaningful change. One that recognises how education debt can quietly hold people back and offers a chance to rebalance. If you have a HECS balance, know your balance will change once it's been fully signed off and implemented (which could take a little while yet). But now is the time to consider what this might unlock for you, whether it is faster progress toward a financial goal, or simply one less barrier in the way to buying a property.
Perth Now
24-07-2025
- Business
- Perth Now
Bank removes ‘roadblock' for homebuyers
National Australia Bank has become the latest lender to ignore some Higher Education Loan Program debt when assessing new home loans. From July 31, NAB says if someone owes $20,000 or less in student debt, it won't affect how much they can borrow should they take out a new loan with the big four bank. This will help lift the borrowing capacity of a potential borrower, as banks consider income, liabilities and outstandings when calculating how much they will give a potential borrower. Major banks are beginning to exclude student debt in their serviceability criteria. NewsWire / Nicholas Eagar Credit: NewsWire NAB executive for home ownership Matt Dawson said the change would make a real difference for first-home buyers especially. 'For too long HELP debt has been a roadblock for many Australians looking to buy a home,' Mr Dawson said. 'NAB was pleased to advocate for this change last year which will allow more people to turn their homeownership dreams into reality, faster.' The NAB move is in line with the Commonwealth Bank, which in April said it would exclude HELP debt from home loan serviceability calculations on the basis the applicant could pay off their debt in the next 12 months. CBA also said it was piloting plans for those who could pay off HELP loans over the next one to five years. In February, student debt came into the spotlight when Treasurer Jim Chalmers told the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority (APRA) to update their guidance on how banks should treat student debts. NAB changes to HELP serviceability will start on July 31. NewsWire / Gaye Gerard Credit: News Corp Australia In June, APRA said the changes would come into effect from September 30 2025. While NAB welcomed the move by the regulator to increase buying capacity for homebuyers by clarifying the treatment of HELP debt, Mr Dawson said housing supply remained the most significant challenge. 'It is critical to address both demand and supply-side measures together to help more Australians buy a home. There's no simple fix, solving Australia's housing challenges will take collaboration across the board.' NAB's move comes after the Albanese government announced changes to HELP debt on Wednesday. In its first Bill since returning to office, the government plans to slash 20 per cent off three million graduates' HELP debt. This is the equivalent of $16bn in total relief, according to the government. The move targets HELP debt, VET loans and apprenticeship loans. Calculations released by the government show $5520 would be wiped off the average HELP debt of $27,600 if the legislation passes. The changes would also raise the minimum threshold for student loans to be repaid from $54,000 to $67,000.
West Australian
20-06-2025
- Business
- West Australian
‘Crocodile tears': Home loan change could add to worsening housing crisis
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Perth Now
20-06-2025
- Business
- Perth Now
‘Crocodile tears': Warning over key change
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. It's now a little easier to buy a home. NewsWire/ Gaye Gerard Credit: News Corp Australia 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. Independent economist Saul Eslake says the government cries 'crocodile tears' for first-home buyers while introducing measures that increase housing prices. Chris Kidd Credit: News Corp Australia 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Daily Mail
04-05-2025
- Business
- Daily Mail
Anthony Albanese to bailout millions of Aussies with student debt: How much you'll be getting
Anthony Albanese 's government will cut 20 per cent off all student loan debts, wiping around $16billion in student debt for around three million Australians. The policy - central to Mr Albanese's re-election campaign - is now set to be implemented following his election victory as of June this year. Under the plan, a graduate with an average student debt of $27,600 will see their loan reduced by $5,520, according to government figures. Mr Albanese's proposed reform would apply to all Higher Education Loan Program, Vet Student Loans, Australian Apprenticeship Support Loans and other income-contingent student loans. 'Our whole nation benefits when we make it easier for people to access education. This is about opening the doors of opportunity – and widening them,' Anthony Albanese previously said in a statement when announcing the plan. The reforms would also raise the threshold for repayment from $54,000 to $67,000 and lower the rate to be repaid. For someone on an income of $70,000 this will mean they will pay around $1,300 less per year in repayments. This builds on a $3billion policy introduced last year, which links student debt indexation to the lower of the wage price index or the consumer price index. Without it, graduates could have faced another steep increase, like in 2023, when indexation soared to 7.1 per cent - up from 3.9 per cent the year before - adding $1,759 to the average student debt of $24,770. How much your student debt will be wiped by is revealed in the table above Mr Dutton had vowed to scrap Labor's student debt relief if the Coalition had won Saturday's election, arguing its unfair on tradies who didn't go to university. Increasing its majority in parliament with a resounding victory, Labor has gained a second term in office with large swings across marginal electorates and in former Liberal heartland seats. With 71 per cent of the vote counted, Labor has won 85 seats with the coalition going backwards to sit on 37 seats, while 18 seats remain in doubt. Among the significant wins for Labor was Peter Dutton's electorate of Dickson, as he became the first opposition leader to lose his seat at an election. Treasurer Jim Chalmers said Mr Albanese will go down in history as a Labor hero following the result. 'This was beyond even our most optimistic expectations,' he told ABC's Insiders program on Sunday. 'It was a history-making night, it was one for the ages. 'This victory does come as well with healthy helpings of humility, because we know that there are a lot of challenges to address in our economy.' With expanded numbers in the House of Representatives, Dr Chalmers said Labor was able to implement its 'ambitious' agenda. 'One of the reasons why we got this big majority last night is because people recognise that if you wanted stability while the global economy was going crazy, then a majority Labor government was the best way to deliver that,' he said. The coalition crashed to its lowest-ever primary vote and could record a historic low number of seats, resulting in party soul-searching as the Liberals begin the process of electing a new leader.
