National Australia Bank (nab) has announced a significant shift in how it assesses student debt in home loan applications, aiming to improve borrowing capacity for first-time property buyers across Australia. The move follows increasing pressure from government and regulators to ease financial barriers posed by higher education loan obligations.
This change comes amid broader discussions on housing affordability, as prospective buyers face mounting challenges from stagnant wages, rising property prices, and strict lending criteria. With HELP debt often cited as a limiting factor in mortgage approvals, nab’s policy revision could have implications for millions of younger Australians navigating the property market.
Nab Changes Home Loan Eligibility Criteria
Starting July 31, National Australia Bank will no longer factor in Higher Education Loan Program (HELP) debts under $20,000 when assessing new home loan applications. This shift is expected to lift borrowing limits for many applicants, particularly younger Australians with moderate student loan balances. Under existing serviceability assessments, student debts are treated as liabilities, directly reducing the amount borrowers can access.
nab’s Executive for Home Ownership, Matt Dawson, emphasized that the change will be especially impactful for first-home buyers. “For too long HELP debt has been a roadblock for many Australians looking to buy a home,” Dawson stated. He added that nab advocated for this policy adjustment in 2023 and welcomed its adoption, seeing it as a step toward making homeownership more attainable.
Commonwealth Bank Made a Similar Move Earlier
The decision aligns nab with another major lender, Commonwealth Bank of Australia (CBA), which introduced a related measure in April 2025. CBA announced it would exclude HELP debt from loan assessments for borrowers who could demonstrate the ability to fully repay their student loans within 12 months. Additionally, CBA has been piloting programs for applicants expected to repay their debts within one to five years.
These initiatives represent a shift in how major banks evaluate educational debt, marking a growing recognition of the disproportionate impact such liabilities can have on younger or lower-income buyers attempting to enter the property market.
Government and Regulatory Involvement
This evolving stance from lenders follows increased pressure from the federal government. In February, Treasurer Jim Chalmers called on the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to update their guidelines on the treatment of student loans in mortgage applications. These agencies play a central role in shaping lending standards across the financial sector.
In response, APRA confirmed that updated guidance on HELP debt will come into effect from September 30, 2025. The goal is to ensure greater consistency across lending institutions while enhancing access to homeownership for Australians burdened by student loans.
Albanese Government Proposes Additional Debt Relief
In parallel with changes from banks and regulators, the Albanese government introduced a legislative proposal that would cut 20% from HELP, VET, and apprenticeship loan balances held by approximately three million graduates. Announced in July 2025, the bill represents the government’s first major legislative action following its return to office.
According to federal estimates, this reduction would erase an average of $5,520 from typical HELP debts of $27,600, translating into $16 billion in total relief. The plan also raises the income threshold for mandatory HELP repayments from $54,000 to $67,000, further easing financial pressure on low- and middle-income earners.
Housing Supply Remains a Persistent Obstacle
While changes to debt servicing rules may assist with affordability, nab cautioned that increasing borrowing capacity alone will not resolve Australia’s housing supply crisis. “It is critical to address both demand and supply-side measures together to help more Australians buy a home,” Dawson noted, stressing the need for coordinated national action.
Ongoing shortages in new housing stock and infrastructure continue to restrict options for potential buyers, particularly in urban centers like Sydney, Melbourne, and Brisbane. According to industry analysts, any meaningful improvement in affordability will require long-term investments in construction, zoning reform, and support for first-time buyers.
