For a long time, students have been facing issues in getting their HELP (Higher Education Loan Program) loans clarified so they can buy their first home. This was happening due to the complex lending procedure, which only considers income as the main criterion for loan approval. For instance, the students need to undergo the same HECS repayment calculations that reduce their borrowing capacity as first-home buyers.
New HELP Debt Guidelines by ASIC
However, recently, ASIC took the concern seriously and announced new guidelines under Regulatory Guide 209 Credit Licencing: Responsible Lending Conduct (RG 209). These guidelines include:
Income criteria
Since income is the main criterion, Student needs to start repaying the loan only when he starts earning above a certain threshold. There is a possibility that students may not begin earning at the time of taking a loan. Therefore, lenders should treat HELP debts differently from other loans.
Ignoring HELP debt in some cases
Lenders may ignore HELP debt when calculating a student’s living expenses if they believe it would not affect a student’s ability to repay a home loan. However, the decision will depend on the outstanding loan amount, the repayment timeline, and the duration of the mortgage from the student’s end.
Assessing necessary expenses
ASIC said that it may be difficult to determine all the necessary expenses and whether they can be reduced under RG 209.67. However, by knowing more details about them, lenders can determine whether the student has high essential spending, which cannot be reduced due to their circumstances. The information will then help them assess the actual borrowing capacity of students while taking HELP debt.
Impact of HELP Debt Guidelines on Students/First-Home Buyers
ASIC introduced these guidelines to ensure more and more homebuyers can get into their homes through student loans. As a result, ASIC also stated that credit licensees are necessarily required to comply with Responsible Lending Obligations.
These actions by ASIC showed that it is committed to solving the housing affordability challenge from every angle. With these, the first home buyers, particularly the students, can easily take HELP debt to buy their first home. This will further increase their borrowing capacity, which will lead them to take loan approval easily.
However, students still need to be cautious while taking home loans. Since all lenders will not exclude HELP debt, the student needs to compare them for better home loan options. They still need to maintain their financial stability because lenders will still review their necessary habits. Additionally, they have to save a deposit and maintain a favorable credit score to qualify for the best loan options.
APRA Desired Actions Followed By ASIC Guidelines
Followed by ASIC guidelines on HELP debt, APRA will also likely introduce similar changes and update the regulatory guidance. Such changes will ultimately ensure the construction of more housing units, thereby reducing the housing affordability challenges for first-home buyers, including students.
Thus, ASIC has now introduced fair guidelines for HELP debts. So, students don’t need to undergo complex lending procedures while taking home loans. This will significantly benefit them in taking more loans while improving their borrowing capacity and housing affordability challenges.
For more information, reach us at Nfinity Financials or call us at 1300 GET LOAN (1300 438 562) or 0456 456 267.
