For medical professionals in Australia, a HECS-HELP debt is often viewed as a “good debt”. Unlike a mortgage or credit card, HECS-HELP debt does not incur interest. Instead, it is indexed annually on June 1st to maintain its real value. Recent legislative changes have made this debt even “cheaper” to hold. As of 2025, your debt is indexed at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI).

The indexation rate is usually lower than the average return on investment if the cash is invested into a high high-interest savings account, offset account, or stock portfolio. Therefore, mathematically, it rarely makes sense to pay off doctor HECS debt voluntarily if you can earn a higher return elsewhere.

However, as property prices rise and lending criteria tighten, this debt can become a significant roadblock to securing a mortgage.

Recent changes to the 2025 repayment system and banking policies have shifted the landscape. This guide breaks down exactly how HECS affects your financial life as a doctor, the new marginal repayment rules, and the strategic trade-offs between paying it off versus saving for a deposit.

Doctor HECS Repayment Calculator (2025)

Use this interactive tool to estimate your repayment obligations under the new 2025 marginal rate system and see if paying off your doctor HECS debt makes mathematical sense for your mortgage goals.

The New HECS Repayment System (2025-26 Changes)

The Universities Accord legislation has introduced the most significant changes to HECS repayments in over a decade. For junior doctors and registrars, this will likely reduce your annual cash outflow, but there is a sting in the tail for high income earners.

From 1 July 2025, the system moves from a whole-of-income calculation to a marginal rate system.

• Old System: If you earned $1 over a threshold, you paid a percentage of your entire income.
• New System (2025-26): You only pay a percentage on the income above the threshold (similar to income tax brackets).

The 2025 Thresholds:

• $0 – $67,000: Nil Repayment.
• $67,001 – $125,000: You pay 15% of every dollar earned above $67,000.
• $125,001 – $179,285: You pay a fixed $8,700 base + 17% of every dollar above $125,000

There is a critical catch for consultants and senior registrars. If your Repayment Income exceeds $179,286, the system reverts to the old logic: you pay 10% of your TOTAL income. For example, a consultant with a repayment income of $200,000 does not benefit from the marginal rates. They will pay $20,000 (10%) straight to HECS.

You can find out more about the new HECS repayment thresholds here

Repayment Income vs Taxable Income

Doctors often underestimate their HECS liability because they confuse Gross Taxable Income with Repayment Income (RI).

Your compulsory HECS repayment is calculated on Repayment Income, which adds back several tax-minimisation strategies common in medicine.

The Formula:

Repayment Income = Taxable Income + Total Net Investment Loss + Reportable Fringe Benefits (RFBA) + Reportable Super Contributions.

Why This Matters for Doctors

1. Salary Packaging: The benefit you package for living expenses (e.g. $9010 for NSW Health employees) is added back to your income for HECS calculations. You don’t save HECS by packaging; you only save income tax.
2. Deductions: Legitimate tax deductions (AHPRA fees, college fees, indemnity insurance) reduce your Taxable Income, and therefore reduce your HECS repayment.
3. Investment Losses: If you have a negatively geared investment property or losses from stock investments, the loss is added back. These losses again reduce your taxable income, and potentially capital gains tax liability, but they do not reduce your HECS repayment.

HECS Debt and Borrowing Power for Doctors

When applying for a medical professional home loan, banks view your HECS debt in two ways: Serviceability (monthly cash flow) and Debt-to-Income Ratio.

The Serviceability Hit

Most lenders do not care about the size of your debt (e.g., $40,000 vs $100,000); they care about the monthly repayment.

• Because HECS repayments are compulsory and rise with income, they significantly reduce your Net Disposable Income.
• Rule of Thumb: For every $10,000 of annual HECS repayment, your borrowing power reduces by roughly $100,000 – $120,000.

New 2025 Banking Rules

A major shift is occurring in lending policy. As of 2025, some banks (including majors like NAB and CBA) have started to ignore HECS debt in serviceability calculations IF:

1. The debt is small (e.g., under $20,000); OR
2. Evidence shows the debt will be fully repaid within the next 12 months.

This is a game-changer for doctors close to finishing their repayments.

For example, if your debt is only slightly over $20,000, consider paying it down just enough to fall below that cap. Once it’s under $20k, lenders like NAB may treat your application as if the debt doesn’t exist

Should I Pay Off HECS?

The decision to pay off your doctor HECS early is a trade-off between borrowing power and deposit size.

Scenario A: The Deposit Constrained Doctor

• Situation: You have a 5-10% deposit.
• Advice: DO NOT pay off HECS.
• Why: HECS is an interest-free loan (indexed to inflation). Mortgage interest rates are 6%+. Every dollar you use to pay off HECS is a dollar you cannot use for a deposit, potentially forcing you to pay Lenders Mortgage Insurance (LMI) or miss out on a property entirely.

Scenario B: The Serviceability Constrained Doctor

• Situation: You have a large deposit (20%+) or parental guarantor, but the bank won’t lend you enough because your income is “too low” after HECS.
• Advice: Consider paying it off completely if it’s not going to substantially reduce your deposit. Alternatively, you can reduce the HECS debt to be lower than the certain threshold for lenders to ignore during their calculations.
• Why: If spending $20,000 to clear your HECS increases your borrowing power by $150,000, this is a high-yield leverage move.

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Frequently Asked Questions (FAQs)

Does HECS debt affect my credit score?

No. Unlike a credit card or personal loan, your HECS/HELP debt is not listed on your credit file and does not directly impact your credit score. However, lenders can still see the debt on your payslips (via tax withholding) and tax returns, so you cannot hide it.

Can I hide my HECS debt from the bank?

No. Even though it’s not on your credit report, banks will see the “STSL” (Study and Training Support Loan) withholding on your payslips or notice of assessment. Non-disclosure is considered mortgage fraud and can lead to immediate loan decline.

Is it better to pay off HECS or save for a bigger deposit?

For most doctors, it is usually better to keep your cash for a deposit rather than paying off your HECS debt. The only exception is if your borrowing power is too low to buy the home you want—in that case, clearing the debt might be necessary to boost your serviceability.

Does HECS debt count towards my Debt-to-Income (DTI) ratio?

Yes, but rules are changing. Historically, banks included HECS in your total debt load. However, under new 2025 banking guidelines, some lenders (like NAB and Westpac) are beginning to exclude HECS from DTI calculations or serviceability tests in specific scenarios, such as when the debt is small or will be repaid soon.

Do banks look at the total debt or just the repayments?

Banks care primarily about the monthly repayment, not the total balance. A doctor with a $100,000 debt pays the same monthly amount as a doctor with a $20,000 debt (if they have the same income). Therefore, the “hit” to your borrowing power is often the same regardless of how much you owe, unless you pay it off completely.

Can I use a Guarantor to bypass the HECS problem?

Yes. A Family Guarantee loan allows you to borrow 100% (or even 105%) of the property price by using a parent’s property as security. This is a powerful strategy for doctors because you can use your saved cash to pay off your HECS debt (fixing your borrowing power) and then borrow the full purchase price without needing a deposit.