Clarifying the treatment of HELP debt obligations – response to consultation
To: All authorised deposit-taking institutions
On 20 February 2025, APRA published a consultation on targeted changes relating to how authorised deposit-taking institutions (ADIs) consider Higher Education Loan Program (HELP) debt when assessing home loan applications.1 This letter sets out APRA’s response to submissions to the consultation and is accompanied by the final revised Reporting Standard ARS 223.0 Residential Mortgage Lending (ARS 223.0) and the final revised Prudential Practice Guide APG 223 Residential Mortgage Lending (APG 223).
APRA’s changes have two objectives. The first is to provide regulatory clarity on how HELP debt should be considered under APRA’s prudential and reporting frameworks. The second is to reaffirm the flexibility available to ADIs to consider the individual circumstances of borrowers, including the nature of their HELP debts.
While these changes are expected to enable some borrowers with HELP debts to secure a home loan earlier, APRA expects ADIs to maintain prudent lending practices that underpin their safety and stability and that of Australia’s financial system. These changes are consistent with ASIC’s recent update to its responsible lending guidance to clarify treatment of HELP debt by lenders. APRA remains committed to supporting the Australian community to achieve good financial outcomes, with appropriate guidance to assist ADIs in lending to creditworthy borrowers with existing HELP debts.
Consultation response
APRA received eight submissions in response to this consultation. Non-confidential submissions are available on APRA’s website. Respondents were largely supportive of the changes, though they sought some adjustments and clarifications. The changes to ARS 223.0 and APG 223 reflect feedback received through submissions, and adjustments by APRA to ensure alignment with APRA’s policy intent. Details on specific comments raised in submissions and APRA’s response are provided in Annex A.
Next steps
The effective date of the revised ARS 223.0 is 30 September 2025. ADIs must meet the updated reporting requirements for the September 2025 reporting period. Should you have any queries, please contact your Responsible Supervisor.
Yours sincerely
Therese McCarthy Hockey
APRA Board Member
Annex A - Key issues from consultation
This Annex summarises feedback received through the consultation process and provides APRA’s response.
| Issue | Comments received | APRA response |
|---|---|---|
| Providing 12 months as an example | Some respondents raised concerns with APG 223 specifying ‘within 12 months’ as an example of a reasonable timeframe for excluding HELP debt repayments from serviceability assessments. They argued this would limit the discretion ADIs could use in applying the guidance. These respondents requested the removal of the ‘within 12 months’ reference, arguing this would allow ADIs to decide reasonable timeframes on a case-by-case basis, potentially expanding the cohort of borrowers that would be impacted by this guidance. | The amendments to APG 223 clarify that APRA considers it reasonable for ADIs to consider the individual circumstances of the borrower. The guidance of ‘within 12 months’ aims to anchor expectations on what would be considered reasonable by APRA and align with APRA’s underlying policy intent. For example, a borrower with a HELP debt expected to be repaid in 5 years would have a different risk profile from one expected to repay this debt within 12 months.
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| Capital treatment | Respondents sought guidance on the capital treatment for loans granted through applying the guidance. There were concerns that a non-standard treatment would be overly punitive and disincentivise ADIs from implementing the guidance in practice, undermining the purpose of the proposals. | APRA 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.2 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. |
| Other student debts | Some respondents suggested APRA expand the types of loans captured by the guidance from ‘HELP loans’ to ‘HELP loans and other student loans’. This approach would allow ADIs to exclude a broader range of loan types from serviceability assessments. | APRA’s guidance applies to HELP debt obligations and is consistent with ASIC’s March 2025 update to its Regulatory Guide 209 Credit licensing: Responsible lending conduct.
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| Inconsistent reporting definition and serviceability guidance | Respondents highlighted that the DTI reporting definitions excludes all HELP debt whereas the serviceability guidance only impacts HELP debt expected to be repaid within 12 months. Respondents suggested that APRA align the two approaches to apply to the same loans. | The changes to ARS 223.0 and APG 223 operate differently because they have different objectives. To improve its utility as a risk measure, the DTI definition in ARS 223.0 will exclude HELP debt due to the income-contingent nature of HELP debt repayments. The amendment to APG 223 intends to provide ADIs flexibility to remove HELP debt repayments from serviceability assessments where the ADI considers the borrower will be largely unaffected by HELP debt repayments over the term of the mortgage. |
| Reporting of exceptions | Some respondents suggested that loans under the serviceability guidance should not be reported as exceptions. This would avoid any skewing of exception rate data. Instead, ADIs should only report exceptions where the HELP debt is expected to be repaid later than 12 months. | It is important that ADIs report these loans as exceptions so that each ADI and APRA can monitor the impact. Additionally, these loans do not meet APRA’s existing serviceability guidance and therefore must only be approved on an exceptions basis. |
| Exceptions as a share of total housing lending | Some respondents requested further guidance on an appropriate level of exceptions as a share of total housing lending. | The proportion of exceptions as a share of housing lending is ultimately dependent on an ADI’s own risk appetite and business strategy. Given this would differ between ADIs, APRA cannot provide a level of exceptions as a proportion of total housing lending that ADIs should target. However, the level of exceptions should be prudent and limited, so as not to undermine the intent of an ADI’s core lending policy. |
| Optional DTI reporting | Some respondents requested that the removal of HELP debt from the DTI reporting definition be optional. This would allow ADIs to align their definition of debt with the same definition used within serviceability assessments. | The purpose of the amendment to the DTI reporting definition is to ensure consistency across industry. Allowing the option to report HELP debt as part of DTI would create inconsistency. |
| Implementation timing | One respondent requested additional implementation time to incorporate the changes to the DTI reporting definition within their internal credit assessment processes. | APRA is not delaying implementation as it is beneficial for industry and the changes are not considered overly burdensome. ARS 223.0 comes into effect from 30 September 2025. As such, ADI reporting will be under the new reporting standard for the September 2025 quarter. |
Footnotes
1 Refer to: Clarifying the treatment of HELP debt obligations.
2 Refer to paragraph 5 of Attachment A to Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk and to paragraph 9 of Prudential Practice Guide APG 112 Capital Adequacy: Standardised Approach to Credit Risk.