CBA is changing the way it treats student debt in mortgage assessments, allowing certain borrowers to effectively have their Higher Education Contribution Scheme (HECS) liabilities disregarded—at least on paper. From Wednesday, 9 April 2025, customers whose HECS repayments are due to be cleared within a year will no longer have that debt counted towards their overall liabilities when applying for a home loan. Others with longer repayment timelines—between two and five years—will benefit from a softened serviceability buffer.
The bank says the move is designed to help more Australians get into the property market earlier, particularly those whose student loans were dragging down their borrowing power. It comes not long after Treasurer Jim Chalmers called on financial regulators to reconsider how HECS debts are treated in mortgage evaluations.
George Samios, founder of Madd Loans, believes the change will make a measurable difference for many. He says a couple earning $180,000 combined could now see their borrowing capacity jump from $840,000 to over $1 million. By rethinking how student debt interacts with borrowing criteria, the door opens wider for young professionals struggling to crack the housing market.
But the policy has prompted questions from mortgage industry groups. Peter White from the Finance Brokers Association of Australia says it’s unclear why this leniency is being extended solely to those with HECS debts. He argues that if buffers are too conservative for one group, they might be too conservative for others as well, particularly in a market where affordability pressures are affecting all types of borrowers.
Concerns are already mounting about the broader health of household finances. Mortgage arrears are rising across Australia, especially in Victoria. Higher loan balances and a decline in borrower buffers have made some homeowners vulnerable to shocks. A recent report by Moody’s Analytics showed that Victoria has seen the sharpest increase in early-stage delinquencies, and the trend may spread.
There’s also the matter of HECS indexation. While CBA’s changes might make it easier to borrow, the debt itself isn’t standing still. Based on current inflation-linked projections, HECS balances are expected to increase by 4.2% to 4.8% this year. That means the average debt of $26,494 could rise by more than $1,200, potentially negating part of the benefit of the policy shift.
Some critics worry this could create a distorted view of borrowers’ actual financial positions. If a loan is assessed without factoring in the full weight of education debt, it could put both the lender and the borrower at risk if conditions worsen. On the other hand, supporters argue the change brings overdue nuance to a lending model that has often treated all debt as equal, without accounting for the likelihood of repayment or the long-term earning potential of tertiary graduates.
There’s a political backdrop as well. With the housing affordability debate intensifying and pressure on banks to be seen as more responsive to modern financial realities, the CBA’s announcement lands at a time when homeownership seems increasingly out of reach for many Australians. Cutting young professionals some slack—at least those with steady incomes and clear repayment plans—could be seen as a gesture towards fairness.
CBA hasn’t made public the exact modelling behind its decision, but a training guide for brokers and staff will be released this week to clarify the mechanics. Whether other banks follow suit remains to be seen. Some analysts suggest the market might wait to see how this policy plays out before making similar moves, especially given the current economic jitters.
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