Frequently Asked Questions about Student Loans

With student loan payments often differing from what’s on the credit report, it can be confusing at times knowing how to qualify your borrower, especially since each agency has its own guidelines. For example, when it comes to deferments, some agencies require calculations that produce much higher payments for use in DTI qualification.
We broke down some of the most frequently asked questions for each agency so you can more easily choose the program that’s best for your clients.

Q: What’s the actual qualifying payment on a student loan?

A: ALL LOAN TYPES (FANNIE/FREDDIE, FHA, USDA, VA, CARRINGTON NON-QM)
If the borrower is currently paying on a fully amortized plan, then that monthly payment must be used for qualifying.

Q: What if the payment on the credit report is higher than the actual monthly payment?

A: ALL LOAN TYPES (FANNIE/FREDDIE, FHA, USDA, VA, CARRINGTON NON-QM)
If the amount on the credit report is higher than the actual payment, a recent loan statement can be used to qualify with the actual (lower) payment.

Q: When can $0 or no payment be used?

A: FOR VA LOANS: If payment is deferred for 10 month's past the closing date
FOR FANNIE LOANS: With an income-driven payment (IDP) plan the payment can be as low as $0
FREDDIE, FHA, USDA, VA, CARRINGTON NON-QM LOANS: Not allowed

Q: If the borrower is in deferment or forbearance, can we use a future payment type and amount for the debt calculation?

A: ALL LOAN TYPES (FANNIE/FREDDIE, FHA, USDA, VA, CARRINGTON NON-QM)
No, a borrower must be in the payment plan for the payment amount to be used.

Q: Can a borrower that is in deferment or forbearance restart their loan payment process to show a lower payment?

A: ALL LOAN TYPES (FANNIE/FREDDIE, FHA, USDA, VA, CARRINGTON NON-QM)
Yes, however, the updated payment amount will need to be included on a recent monthly statement.

Q: What about student loans in deferment or forbearance?

A: FOR FANNIE GUIDELINES: The higher of these must be used:

• 1% of the student loan amount
• The payment reported on the credit report

FOR FREDDIE GUIDELINES: The higher of these must be used:

• 0.5% of the student loan amount
• The payment reported on the credit report

FOR FHA GUIDELINES: The higher of these must be used:

• 1% of the student loan amount
• The payment reported on the credit report
• Any payment plan that isn’t a fully amortized program (including IDP) will not be accepted.

FOR USDA GUIDELINES: The higher of these must be used:

• 1% of the student loan amount
• The payment reported on the credit report

FOR VA GUIDELINES: The lower of these may be used:

• The payment on the borrower's credit report
• 5% of the loan balance divided by 12

Example: 5% x $30k loan = $1,500. $1,500/12 = $125 monthly debt obligation.
If the credit report payment is lower it can be used with documentation (e.g. monthly statement)
FOR CARRINGTON NON-QM GUIDELINES: The higher of these must be used:

• 1% of the student loan amount
• The payment reported on the credit report
• IBR - Income-Based plans must use 1% of the current balance as the qualifying payment.

Other Qualifying Questions

Q: If the borrower is in deferment or forbearance, can we use a future payment type and amount for the debt calculation?

A: a borrower must be in the payment plan for the payment amount to be used.

Q: Can a borrower that is in deferment or forbearance restart their loan payment process to show a lower payment?

A: however, the updated payment amount will need to be included on a recent monthly statement.

Links to Full Guidelines

• Fannie
• Freddie
• FHA
• VA
• USDA
• Carrington