Student Loans

Conventional - Fannie Mae

If a payment amount is provided on the credit report, that amount can be used for qualifying purposes. If the credit report does not identify a payment amount (or reflects $0), you can use either 1% of the outstanding student loan balance, or a calculated payment that will fully amortize the loan based on the documented loan repayment terms.  If the borrower is in an IBR (income based repayment) plan you may use the current IBR payment as long as you have a copy of the current IBR agreement in the file to support the payment amount.

Conventional - Freddie Mac

For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the monthly payment must be determined as follows:

  • If the payment is not listed on the credit report or is listed as deferred, obtain current documentation to support the payment amount to be included in the monthly debt-to-income ratio.

  • If no payment is reported, and there is no documentation in file indicating the proposed monthly payment amount, use a minimum of 1% of the outstanding balance for qualifying.

FHA

Regardless of the payment status, use either:  The greater of 1% of the outstanding balance reported on the loan or the monthly payment reported on the credit report or the actual documented payment provided the payment will fully amortize the loan over its term.

USDA

Fixed payment loans: An amortized, fixed payment may be used in the debt ratio when the lender retains documentation verifying the payment is fixed, the interest rate is fixed and the repayment term is fixed.

Non-Fixed payment loans: Payments for deferred loans, income-based repayment (IBR), graduated, adjustable and other types of repayment agreements that are not fixed cannot be used in the total debt ratio calculation. The higher of one-half percent (0.50%) of the loan balance or the actual payment reflected on the credit report must be used as the monthly payment in the underwriter decision. No additional documentation is required.

VA

If the Veteran or other borrower provides written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered.  If a student loan is in repayment or scheduled to begin within 12 months from the date of closing, you must consider the anticipated monthly obligation in the loan analysis and utilize the payment established below. Calculate each loan at a rate of 5 percent of the outstanding balance divided by 12 months (example: $25,000 student loan balance x 5% = $1,250 divided by 12 months = $104.17 per month is the monthly payment for debt ratio purposes).

  • You must use the payment(s) reported on the credit report for each student loan(s) if the reported payment is greater than the threshold payment calculation above.

  • If the payment reported on the credit report is less than the threshold payment calculation above, the loan file must contain a statement from the student loan servicer that reflects the actual loan terms and payment information for each student loan(s). The statement(s) must be dated within 60 days of closing and may be an electronic copy from the student loan servicer’s website or a printed statement provided by the servicer.