Student Loans by Loan Type
Conventional
Student loans must be included in the borrower’s liabilities, regardless of payment type or status of payments (cannot exclude based on a deferral or forbearance).
• Fannie Mae:
o 1% of the outstanding balance on the loan; or
o The actual payment that will fully amortize the loan as documented on the credit report or by the lender (the credit report must indicate it is a fully amortized payment; if using this option, a supplement may be used to support this information if it can be obtained, otherwise the loan documentation will need to be provided to show the fully amortized payment); or
o A calculated payment that will fully amortize the loan based on the documented loan repayment terms; or
o If the repayment terms are unknown, a calculated payment that will fully amortize the loan(s) based on the current prevailing student loan interest rate and the allowable repayment period shown in the table below.
The “current prevailing student loan interest rate” can be found on a variety of websites. For example, see US Department of Education Federal Student Aid:
https://studentaid.ed.gov/sa/types/loans/interest-rates
Note: The lender is responsible for determining that the payment on the credit report or other documents provided by the student loan lender or borrower are fully amortizing payments.
| Calculating a Student Loan Repayment | |
| Total Outstanding Balance of All Student Loans | Repayment Period |
| $1 – $7,499 | 10 years |
| $7,500 – $9,999 | 12 years |
| $10,000 – $19,999 | 15 years |
| $20,000 – $39,999 | 20 years |
| $40,000 – $59,999 | 25 years |
| $60,000+ | 30 years |
Example: Calculating an Amortizing Payment
Balance: $17,500
Repayment Period: 15 years (based on balance from table above) Interest Rate: 4.29% (look up using website link)
Monthly Amortizing Payment: $132
- Freddie Mac:
If there is a payment reporting on credit, use the reporting payment.
If there is no payment reporting on credit or the loan is reporting as deferred or in forbearance, then one of the following must be used:
-1% of the outstanding balance on the loan; or
-Documentation reflecting the proposed monthly payment amount (e.g. installment loan agreement or loan letter)
FHA:
Student loans must be included in the borrower’s liabilities, regardless of payment type or status of payments (cannot exclude based on a deferral or forbearance).
- The actual documented payment provided the payment will fully amortize the loan over its term.
- If the actual documented payment is not provided, then the greater of:
o 1% of the outstanding balance on the loan; or
o The monthly payment reported on the borrower’s credit report
VA:
- If the student loan payment(s) are reflecting as deferred on credit, documentation must be provided to show that the deferral will continue for greater than 12 months from the date of the loan closing in order to exclude a payment for the student loan.
- If it cannot be proven that a deferral is greater than 12 months from date of closing, or the loan is not reflecting as deferred on credit, the following must be used to calculate the payment:
o Payment reflected on the credit report; or
o The proposed payment provided in a statement from the lender; or
o 5% of the loan balance for the payment.
USDA:
Student loans must be included in the borrower’s liabilities, regardless of payment type or status of payments (cannot exclude based on a deferral or forbearance).
- For fixed rate student loans – the actual payment that will fully amortize the loan must be used
(need verification of the payment, term, and balance).
- For non-fixed payment student loans (e.g. Income Based Repayment, Graduated Payment, or
Adjustable Payments), 1% of the current loan balance must be used.
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Questions, Comments or For more information you can contact Christian Penner at: Call/Text: (561) 373-0987 or visit us online at www.ChristianPenner.com
The Christian Penner Mortgage Team, A Branch of
American Financial Network, Inc
CORP NMLS# 237341 ; Equal Opportunity Employer ; Equal Opportunity Lender American Financial Network, Inc. 10 Pointe Drive, Suite 330, Brea, CA 92821.
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