HECS Debt and Your Borrowing Power: What Vets Need to Know

The rules changed in 2025. Here is what it actually means for how much you can borrow.

If you are a vet with a HECS debt sitting in the back of your mind every time you think about buying a home, you are not alone. Almost every new graduate vet carries one, and almost every lender treats it as a reason to lend you less. The good news is the rules changed in 2025, and they changed in your favour. The better news is that once you understand how HECS actually affects your borrowing power, it stops being something to fear and becomes just another number to plan around.

How HECS Actually Affects Your Borrowing Power

When a lender assesses your home loan application, they do not just look at your gross income. They look at what is left over after tax, existing debts, living expenses, and compulsory repayments, including HECS. The more of your income that goes towards a compulsory HECS repayment, the less is assumed to be available for a mortgage. This is a real and reasonable thing for lenders to account for. The issue for many vets is not that HECS gets factored in, it is that some lenders factor it in more harshly than the rules require.

The 2025-26 HECS Changes You Need to Know

From 1 July 2025, the way HECS repayments are calculated changed significantly, and for the better.

• The repayment threshold rose from $54,435 to $67,000. Below this, you make no compulsory repayments at all.

• Repayments now work on a marginal system, similar to income tax. You only pay the higher rate on the income within each bracket, not your entire income once you cross a threshold.

• The rates are 15 cents per dollar earned between $67,000 and $125,000, then $8,700 plus 17 cents per dollar between $125,000 and $179,285, then 10% of total income above that.

• A one-off 20% reduction was applied to all outstanding HECS balances as at 1 June 2025, processed automatically by the ATO.

For a vet earning a typical early-career salary, this means a noticeably smaller compulsory repayment than under the old system, and therefore more income available for serviceability than you might expect.

Why This Still Catches Vets Out

Even with these changes, HECS remains one of the more inconsistently handled items in a vet's loan application, for a simple reason: many lenders use older, more conservative internal calculators that have not been updated to reflect how vets typically progress through their careers. A new graduate vet on $75,000 with a HECS debt looks, on paper, like someone with limited borrowing capacity. A lender who understands the profession knows that vet salaries grow quickly in the first five years, and that the HECS repayment will shrink in relative terms as income rises.

Lenders use different internal calculators for HECS, and the gap between a conservative assessment and an accurate one can run into tens of thousands of dollars of borrowing capacity, even on the same income.

What This Means in Practice

If you are a new graduate vet or a few years into your career with an outstanding HECS balance, here is what matters most when it comes to your home loan application:

• Your compulsory repayment is calculated on your repayment income, which includes more than just your salary, so it is worth knowing your full figure before you apply.

• HECS carries no interest, only annual indexation tied to CPI or the Wage Price Index, whichever is lower, so it behaves very differently to a credit card or personal loan in a lender's eyes, even though some calculators do not always reflect that nuance well.

• Paying down HECS faster purely to improve your borrowing capacity is rarely the best financial decision. In most cases your money is better directed towards your deposit or buffer, and a broker who understands vet income can find a lender whose HECS treatment already works in your favour.

Our Experience With This

Shelley carried a HECS debt through the early years of her veterinary career, at a time when the rules were less generous than they are now. We understand both how the system has worked and how it has changed, and we know which lenders apply the new rules accurately and which are still catching up. That difference matters more than most vets realise.

Not sure how your HECS debt affects what you can borrow?

Book a free discovery call. We will walk through your numbers and tell you exactly where you stand.

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