FHA Student Loan Guidelines 

The FHA now requires one of the following criteria to be used to determine how much student loan debt repayment to include in the calculations to qualify for an FHA mortgage loan:

• The amount that appears on the student’s credit report (if it is above $0)
• The actual payment amount that appears on the student loan documentation
• If the credit report shows $0, the lender can use 0.5% of the loan balance as the required payment (this was reduced from 1% in June of 2021)
• If you are on a repayment plan that allows for payments lower than appear in your credit report (for example, you are on an IBR or other payment program that allows for lower payments than your original loan documentation) the lender can ask for documentation from your student loan servicer. Once that amount is confirmed, they can use that lower number, as long as it is not $0. If the IBR payment is $0, the lender will use 0.5% of the loan.
• The lender can exclude student loan payments entirely if you can provide written documentation from the student loan servicing company that the loan balance has been forgiven, discharged, canceled, or otherwise paid in full.

Application Examples

FHA Loan Guidelines For Student Loans

• Payment Is Listed On Credit Report: Jacob owes $150,000 on his student loan. His credit report shows his monthly payment as $200. The lender will use the $200 documented number
• Payment Is Not Listed On Credit Report, Or It Is Listed As $0 On The Credit Report: Hailey’s balance on her student loans is $100,000, but her credit report shows $0 as her monthly payment. The lender will use 0.5% of the $100,000 remaining balance as the required payment amount ($100,000 * .005 = $500)
• Loan Is In Deferment Or In IBR Status: Skylie owes $200,000 on her student loan, but her payments are currently in deferment because she is part of the IBR program, and her income-based payment is currently $100 per month. The loan officer will use 0.5% of $200,000 = $1000 unless Skylie can show written confirmation from her loan servicer that her current payment is $100. As long as her IBR payment is greater than $0, they can use that amount. If the IBR payment is $0, then they will use 0.5% of her income for mortgage qualification.

Conventional Loan Guidelines 2023: Student Loans

Conventional loans (loans not guaranteed by the government through programs like FHA, USDA or VA) tend to use either Fannie Mae’s Freddie Mac’s guidelines.

2023 Fannie Mae Conventional Loan Guidelines For Student Loans:

• If the student loan payment is shown on the credit report, they use that amount
• If the student loan payment is not shown on the credit report, or if it appears as $0 on the credit report, they use the amount shown on the student loan documentation (the most recent student loan statement is acceptable)
• If the student is on an IBR (income-based repayment) plan, that amount will show up on the most recent student loan statement and that amount should be used. If the monthly payment shows on that statement as $0, they can use $0
• If the loan is deferred or in forbearance, the lender should use 1% of the outstanding loan balance or calculate a payment rate based on the student loan documentation showing repayment terms.

2023 Freddie Mac Conventional Loan Guidelines For Student Loans:

• If the student loan payment is shown on the credit report or other student loan documentation is greater than $0, they use that amount
• If the student loan payment on their credit report is $0, they use 0.5% of the outstanding loan balance (as shown on the credit report)
• If the student has 10 or fewer monthly payments left until the full balance of their loan is paid off, forgiven, cancelled, discharged, or in case of an employment contingent repayment program – paid off, the lender can use $0 as the monthly payment required*
• If the loan is deferred or is in forbearance and the loan will be forgiven, cancelled discharged or considered paid at the end of the deferment or forbearance period, the lender can use $0*
  * unless the lender is aware of any circumstances where the student will not be eligible for those programs. Evidence of eligibility must come from the student loan servicer or the employer.

VA Student Loan Guidelines 2023:

• If the student loan will be in deferment for at least 12 months after the mortgage is secured, they can use $0 
• If the student loan repayment amount is shown on the credit report, they use that number 
• When no payment amount is reported or available, the lender will use 5% of the current balance divided by 12 to determine the payment
• If the student is in an IBR program, and their payments under that program are fixed for at least 12 months, they can use that amount. (It’s difficult to qualify for this because IBR payments are reevaluated every year, so you would need to get your loan at the same time as your IBR evaluation to qualify using this standard.) If the IBR payments are not fixed for the next 12 months, they will use 5% of the current balance divided by 12.

USDA Student Loan Guidelines 2023:

• If the loan is fixed – payments are consistent, the interest rate is consistent and the repayment term is fixed, the lender will use that repayment amount
• If the loan is not fixed – it is adjustable, deferred, income based repayment (IBR), graduated or income contingent (IC), the lender will use one of the following:
  • When the payment amount is $0, the lender will use 0.5% of the loan balance from the credit report or loan documentation as the loan payment amount
  • When the payment is above $0, the lender will use the approved repayment amount shown in the loan documentation
• If the loan is in a forgiveness plan, the lender will use the applicable documented payment until the loan is released as a liability
• If the loan is in the name of the student but being paid by someone else, it remains a legal obligation of the student, so payments must be included in the monthly payment amount even if they aren’t making those payments.