Banks have been urged to consider the individual circumstances of people with university debt when weighing their home loan applications, in a bid the improve ownership.
The Australian Prudential Regulation Authority, which supervises the financial services industry, told a parliamentary inquiry that banks should be "understanding the features" of a person's HELP debt when assessing whether to approve a home loan.
The authority was asked if there was a case to reclassify university debt to differentiate it from other kinds as people struggled to obtained loans and buy their own homes due to outstanding HELP payments.
Changes to university funding under the Job Ready Graduates program, hiked fees for students in humanities, arts and social sciences the highest.
Funding arrangements were altered in an attempt to redirect students into particular courses by changing fee-contributions.
Therese McCarthy Hockey, an executive board member of the authority, said university debt behaved differently compared with other types because it came straight out of taxable income.
"There's no flexibility on paying your HECS at the moment in the way it's structured," she told the hearing on Friday.
"Individual circumstance is always something that banks need to be looking at."
Ms McCarthy Hockey said some banks would look at if a person had tens of thousands of dollars of university debt and were just starting out, as opposed to being close to paying off their HELP loan and being at the end of that process.
She said banks also considered whether that person could honour the repayments throughout the life of the loan.
Asked if the authority had formed a view based on the Universities Accord's recommendation for a reconsideration how HELP debts were factored into mortgage assessments, Ms McCarthy Hockey said it was appropriate for banks to take into account whether debt repayments could affect that person's ability to pay off a loan.
The Australian Banking Association has been contacted for comment.
