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The regulator has issued new guidance stating that HELP debts should be excluded from the credit limit of all debts held by borrowers when calculating DTIs.
The Australian Prudential Regulation Authority (APRA) has finalised changes to how authorised deposit-taking institutions (ADIs) treat Higher Education Loan Program (HELP) debt repayments when assessing home loan applications.
The new reporting standard and regulations (ARS 223.0) come into effect from 30 September 2025. As such, ADI reporting will be under the new reporting standard for the September 2025 quarter.
The regulator said that HELP debts must be excluded from the credit limit of all debts held by the borrower for the purposes of calculating the debt-to-income ratio (DTIs).
APRA expects an ADI to consider a borrower’s HELP debt obligations alongside other debt commitments when assessing their borrowing capacity. That is because HELP repayments are deducted from gross income and are not available to service a mortgage, it said.
However, APRA considers it is reasonable for ADIs to take into account the individual circumstances of the borrower and the nature of their HELP debts.
In that case, APRA expects ADIs to make judgements in line with their lending policies, risk appetite, and after considering the individual circumstances of a borrower.
For example, an ADI may consider it reasonable to remove HELP repayments from a serviceability assessment where a borrower is expected to pay off their HELP debt within 12 months.
This loan serviceability override would be on the basis that the ADI considers the borrower will be largely unaffected by HELP repayments over the remaining term of their mortgage.
APRA expects ADIs to have prudent frameworks for dealing with overrides, including relating to HELP debts.
The guidance of ‘within 12 months’ as an example of a reasonable time frame aims to “anchor expectations on what would be considered reasonable by APRA and align with APRA’s underlying policy intent”, the watchdog said.
APRA also said that it expects an ADI to have appropriate processes in place to determine whether loans approved through overrides to internal policy would be treated as a standard or non-standard loan for capital purposes.
Where an override is used to exclude HELP debt repayments for assessing serviceability, APRA expects ADIs to consider risks relating to the expected remaining term of the HELP debt.
APRA considers it would be reasonable, where an ADI has made a positive determination of the borrower’s ability to meet their repayment obligations, and after taking the above factors into account, to classify such a loan as standard.
Much of APRA’s updated guidance is in response to a consultation that began at the end of February when it wrote to banks for feedback on proposed changes to student debt repayments.
The finalised guidance comes following a request by federal Treasurer Jim Chalmers for the regulator to consider updating its guidance to make it easier for those with student debt to get a home loan.
By March, ASIC had confirmed it had updated its student debt guidelines, saying lenders can be more flexible with their assessment of student debt compared to other consumer debts.
APRA’s new guidance is consistent with ASIC’s March 2025 update to its Regulatory Guide 209 Credit licensing: Responsible lending conduct.
Some lenders, including the Commonwealth Bank of Australia (CBA) have already introduced new assessment criteria for their treatment of student debt, after earlier changes to regulatory guidance.
[Related: APRA seeking feedback on student debt repayment reforms]
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