Student debt set for sharp, inflation-adjusted increase

HECS-HELP student debt will rise by 7.1% on June 1, in line with the latest inflation rate.

That reflects the recent surge in inflation – the increase was only 3.9% in 2022 and 0.6% in 2021.

The Australian Taxation Office (ATO) has advised people to move fast if they want to reduce their loan balances by making voluntary payments ahead of the indexation change.

“If you intend to make a voluntary repayment before indexation is applied, it is important to allow enough time for the payment to be received and processed by us before 1 June,” according to the ATO.

How student debt impacts mortgage applications

When you apply for a home loan, lenders look at all your liabilities – including your student debt – when deciding whether to approve your application, and how much to lend you.

The higher your HECS-HELP balance, the more critically lenders will assess your application, because every dollar the government garnishees from your salary to repay your student debt is one less dollar you can devote to paying down a mortgage.

That said, making voluntary repayments on your HECS-HELP debt won’t necessarily improve your situation, because it will reduce the amount of money you can contribute to a deposit.

So if you have student debt and you’re thinking about buying a property, it would be a good idea to get professional guidance around how to manage your repayments.

Please contact me ahead of time and I’ll be happy to model a range of scenarios for you. Different lenders assess HECS-HELP debt differently, which means you might have several different options to choose from.