Fannie Agency Plus

Portfolio Access - Jumbo

Freddie

USDA

FHA

VA

What is a Student Loan?

Student loans are debts that creditors offer to clients to pay tuition. This considered an installment debt on the credit report.

How to Determine Payment Used to Qualify for Loans in Deferment or Forbearance

Use the following steps to determine the correct payments:


  • The actual payment reporting on the credit report.


  • If no payment is listed or the payment is $0, use 1% of the existing balance.


  • If the client does not qualify using 1% of the balance, obtain the statement and use the current payment listed.


If the payment provided on the statement is estimated, 1% of the existing balance must be used to qualify.


$0 payments cannot be used when in deferment or forbearance.

























Use the following to determine the correct payments:


  • The actual payment reporting on the credit report


  • If no payment is listed OR the payment is $0, use 0.5% of the outstanding balance.


  • If the client does not qualify using 0.5% of the outstanding balance, obtain the statement and use the current payment listed.


If the payment provided on the statement is estimated, 0.5% of the existing balance must be used to qualify.


$0 payments cannot be used when in deferment or forbearance.






Qualify with the greater of:


  • 0.5% of the outstanding balance


  • $10


  • The actual payment reporting on the credit report.




























Qualify with the greater of:


  • 1% of the outstanding balance


  • $10


  • The actual payment reporting on the credit report









































Qualify with the greater of:


  • Payment listed on the credit report


  • Calculated payment: 5% of the loan balance divided by 12.


(Example of the calculated payment. )


Student Loan Balance: $25,000


Calculated Payment: $25,000 x 5% = $1,250 Annually


$1,250 / 12 = $104.17 per month and include in DTI



  • In Deferment or Forbearance only: If repayment is not scheduled to begin within 12 months from closing, the payment can be excluded from the DTI

How to Determine Payment Used to Qualify for Loans in Repayment

Use the following steps to determine the correct payment:


  • The actual payment reporting on the credit report


  • If no payment is listed or the payment is $0, use 1% of the existing balance.


  • If the client does not qualify using 1% of the balance or the amount on the credit report is incorrect, obtain the statement or repayment plan letter showing the loan is in repayment and use the current payment listed. (if payment is $0, see step 4)


* If the payment provided on the statement is estimated, 1% of the existing balance must be used to qualify.


  • Income Based Repayment or Pay as You Earn Plan: A $0 payment may be used when the client provides documentation from student loan servicer that the payment plan was approved prior to close and will remain $0 on an income based repayment or pay as you earn plan through closing. The payment may not be estimated.


* If client is currently in forbearance with their student loans but was on an Income Based Repayment plan prior to the forbearance, the Income Based Repayment plan amount may still be used.


Use the following steps to determine the correct payment:


  • The actual payment reporting on credit


  • If no payment is listed or the payment is $0, use 1% of the existing balance.


  • If the client does not qualify using 1% of the balance or the amount on the credit report is incorrect, obtain the statement and use the current payment listed.


If the payment shows $0 or an estimated payment, 1% of the balance must be used. A $0 payment is not acceptable.






















Use the following steps to determine the correct payments:


  • Payment is greater than $0: Use the monthly payment on the credit report or on student loan statement.


  • Payment is reporting as $0 on the credit report: Use 0.5% of the outstanding balance, as reported on the credit report. Payment from the student loan statement is not allowed.


  • Payment reporting on the credit report is blank: Use 0.5% of the outstanding balance. Payment from the student loan statement is not allowed.

























Qualify with the greater of:


  • The actual payment reporting on credit


  • 0.5% of the outstanding balance


  • $10


* If documentation can be obtained indicating the actual monthly payment will not increase and will pay the balance off in full, the actual payment can be used.


See the Student Loan Amortized Payment Calculator below.




































Qualify with the greater of:


  • The actual payment reporting on credit


  • 1% of the outstanding balance


  • $10


* If documentation can be obtained indicating the actual monthly payment will not increase and will pay the balance off in full, the actual payment can be used.


See the Student Loan Amortized Payment Calculator below.







































Paying Off / Paying Down Student Loans




Fannie Only: If the client is using 1% of the outstanding balance as a payment, the client may pay down the balance of the student loan to qualify if all of the following are provided:


  • A copy of the student loan statement reflecting the new balance of the student loan


  • Documentation to source the funds used to pay the balance of the loans


Fannie Only: See the Cash Out topic for additional guidelines when paying off student loans.


FHA Only: U.S. Department of Education student loans in collection and charge-off status are considered a federal delinquent debt and must be paid off or satisfied prior to closing. A letter must be obtained directly from the lender showing the account is satisfied and no longer in collections.

Excluding Payment

For student loans showing 10 months or fewer payments remaining, see the Installment Debt Payment Requirements topic for additional guidance.


Freddie only: If the student loan has 10 months or fewer payments remaining until the full balance will be forgiven, canceled, discharged, or paid by an employment-contingent repayment program, then we can exclude the monthly payment with the following requirements:


  • Documentation directly from the student loan program or the employer confirming the client is eligible and approved for forgiveness, cancelation, discharge, or employment-contingent repayment program.


  • Must be in repayment.


If the client could qualify for a student loan forgiveness program in the future, the student loan payment must still be included in DTI. Click here to see examples of student loan forgiveness programs.


Examples of Student loan forgiveness programs:

* Public Service Loan Forgiveness

* Teacher Loan Forgiveness


Fannie, Freddie, & Agency Plus: If the client has been approved for Total and Permanent Disability (TPD) Discharge, the payment may be excluded while in the 3 year post discharge monitoring period, with a copy of the TPD Discharge Letter.


If someone else is making the payments, see the Co-Signed Debt topic for guidance to exclude from DTI.

For student loans showing 9 months or fewer payments remaining, see the Installment Debt Payment Requirements topic for additional guidance.


If the client could qualify for a student loan forgiveness program in the future, the student loan payment must still be included in DTI.


Examples of Student loan forgiveness programs:

* Public Service Loan Forgiveness

* Teacher Loan Forgiveness


If someone else is making the payments, see the Co-Signed Debt topic for guidance to exclude from DTI.











Student Loan in Collection

For student loans in collection, see the Collection and Charge-Off Accounts topic for additional guidance.


USDA, FHA, and VA only: If the loan is a federal loan, see the CAIVRS topic for addition information.