Your HELP Debt and your Home Loan
The Higher Education Loan Programme, or HELP, has benefited many Australians who may not have been able to afford the upfront costs of a tertiary education by offering government funded student loans. However, these loans are still classed as a form of liability and as such can impact an applicant’s ability to borrow for a home loan.
There are currently five categories that make up the HELP debt scheme and can encompass any of the following:
- HECS-HELP: Loan contribution for tuition at a Commonwealth-supported university or approved higher education provider.
- FEE-HELP: Loan contribution to full fee-paying students to pay their tuition fees at a private provider or for postgraduate courses not offered by Commonwealth-supported institutions.
- OS-HELP: Used to assist Commonwealth-supported students undertaking part of their studies overseas.
- SA-HELP: Provides eligible students with a loan to pay for all or part of their student services and amenities fee.
- VET Student loans: Provides a loan to eligible students enrolled in higher level VET courses to pay their fees.
Although there are differences in the types of HELP facilities available, the way they are viewed by your lender is the same.
How do lenders view HELP Debts?
HELP debts are viewed in the exact same manner as any other commitment that an applicant may have, like a car loan, personal loan or credit card and therefore is factored in the capacity to borrow. All lenders assess your capacity to borrow based on your income in relation to your liabilities. In the case where an applicant’s debt to income ratio is high, having a HELP debt may impact your loan application so clearing it could place you in a more favorable position in the event that servicing is tight, and the remaining balance can be paid off.
HELP Debt and your Credit Score
As student loans do not work in the same way as conventional bank loans, they generally will not impact your credit score. As HELP debts are issued by the government, they do not come with an interest charge, but instead are indexed to inflation. In addition, the repayment method is unlike a standard debt but rather is determined by the borrower’s income level, so the greater the earnings the more that is required to pay back.
It is therefore prudent to enlist an experienced mortgage broker to ascertain exactly what you can borrow when considering all your commitments, your HELP debt included. Contact the Blackburne Mortgage Broking team if you need any information about this or anything home loan related.