The Many "Species" of Student Loans & How They Can Affect Your Home Buying

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI



The Many "Species" of Student Loans

& How They Can Affect Your Home Buying



Did you know that it is now thought that there are almost 18,000 bird species to be found across the world?


A recent study released by the American Museum of Natural History revealed a new accounting ... one that almost doubled the number previously known and detailed by researchers.  This new larger number came as a surprise, as scientists have studied birds intently and been "birding" for a long time.  

The new study also revealed that long-held beliefs and methods of scientific bird species classification were antiquated or wrong.  Scientists now believe there is a "hidden" diversity in bird species.  That birds can look similar and actually breed together, but actually be from different species altogether. 

Fascinating stuff, right?  But what does it have to do with Student Loans?  And how does it affect homebuyers? 

Well, just as there are different species of birds ... there are different "species" of Student Loans.  

The 3 major classifications (or "species") of Student Loans are:


  • Federal Student Loans
  • Private Student Loans
  • Refinance Student Loans

... but variations and rules and regulations for each classification of loans can vary greatly.  

And not only is there subtle variations in Student Loans themselves, but their repayment plans, program details, and the impact they take on Mortgage Loan Applicants can also be drastically different.  Those differences can prove challenging ... not only when trying to understand them ... but when considering their use and their short and long term ramification to payments and finances.

Why is that the case?

For starters, not all creditors report Student Loans in the same manner to the 3 major Credit Bureaus (TransUnionExperian, and Equifax).  And not all loan programs or guarantors of mortgage loans view Student Loan debt in the same fashion.

Confusing, right?

As shared above, Student Loans fall into 3 categories, but typically it is Federal and Private Student Loans that are most utilized.  I'm focusing here on those that are Federal Student Loans, as they provide the widest menu of options available to current and future Mortgage Borrowers holding student loan debt.

But first, it's important to know:  

  • Federal Student Loans are administered by the Federal Government.  
  • Federal Student Loans are the most frequently used form of Student Loan.


There are 3 main types of Federal Loans (Department of Education).  Those  are:

  1. Direct Subsidized - (Sometimes called Subsidized Stafford Loans)  These loans help undergraduate students exhibiting financial need.  Interest is not typically charged on the loan during certain periods, such as when the student is at school (at least 50% of the time).  
  2. Direct Unsubsidized - Available to both undergraduate, graduate, and professional degree students.  There is no need to prove financial need associated with this type of loan.  Interest is charged during all periods.
  3. Direct PLUS - Direct PLUS Loans have a fixed interest rate and are not subsidized.  That means that interest charges accrue during the time the student is enrolled in school. 

Direct PLUS Loans come in two different forms:

  1. Grad PLUS - Graduate and professional students are allowed to borrow money to pay for their own education and all costs not covered by other financial aid/grants, up to the full cost of their attendance.
  2. Parent PLUS - These loans are the financial responsibility of the parent, not the student.  They have a fixed interest rate and are not subsidized.  Parent PLUS loans allow parents to borrow money to cover costs not covered by their student's financial aid package, up to the full cost of attendance.  Financial need is not a requirement.


How and when these Student Loans are reported to a Credit Report is critical for current and future home buyers -mortgage applicants.  Most student loans are in deferment while the student is still considered a full-time student.  But once that student is no longer in school or considered "full-time", they must begin repayment of their student loan(s).  
Delay in repayment ... or forebearance ... can also come into play.  Rules for eligibility apply in these cases. 
So the bottom line is that Mortgage Lenders must be aware and know the ramifications of each type of Student Loan if repayment of the loan is in play.  They must also know how that repayment is reported to the credit bureaus. 
The method of reporting can impact their mortgage applicant's Debt-to-Income (DTI) level.  
In some cases: 
  • Creditors show NO payment schedule in effect for the Student Loan. 


  • That translates to ZERO (0) monthly payment or obligation for the Loan.


In most cases (not all), a Mortgage Lender's Underwriter calculates the monthly obligation at 1% of the Student Loan's outstanding balance.  

Equation Example:  

A $50,000 loan with ZERO payment on the credit report:
.01 X $50,000  =  $500 Monthly Payment
Are you even more confused now?  Then consider this ...
There are other calculations available that can actually lessen a monthly payment burden.  The calculation used is dependant on:
  • The Student Loan type involved 
  • The Mortgage Loan Program being utilized  

For potential home buyers that possess a series of Student Loans,  something else might be considered too.  A consolidation of their student loans may be an appropriate and wise pursuit prior to starting your home buying and financing process. 

If considering this action, it's important to conduct thorough upfront research ... or seek professional guidance and assistance ... to arrive at the most advantageous decision and financial action.  What is discovered and the actions taken could have short term or long term impact on the ability to finance a home.  It could also do harm to your overall financial status.
As you can see, there's a lot to know and consider when you're trying to buy a home as a Student Loan holder.  It all can seem pretty daunting.  But it doesn't have to be. 
Information, guidance, and assistance is warranted to navigate it correctly and wisely.   Calling on the services of an experienced Mortgage Lender can make all the difference between home buying success and failure ... and wise and unwise financial decisions.  
Who you choose to work with as your Mortgage Lender is vitally important.  The choice made has consequences and will have a huge impact on the outcome of your mortgage application.  So simply stated, the knowledge possessed and depth of experience your Mortgage Lender has earned while working with prior Student Loan applicants should matter greatly to you.

If you hope to buy a home in the Chicagoland area ... either now or in the future and have Student Loans, be aware of these 3 key points:  

  1. Not all Student Loans are the same 
  2. Diversities exist between Student Loan types.  They can affect the outcome of your home buying/mortgage financing efforts.  Don't assume you know the outcome of a mortgage pre-qualification you haven't had.
  3. If you have Student Loans and hope to buy a home, it's no time to work with a rookie or inexperienced Mortgage Lender  

Choose a Chicagoland Lender that knows and understands all the "species" of Student Loans made both thoroughly and well, how each can affect you financially, and how they can impact your ability to successfully buy and finance a home (both in the short and long term) and make monthly mortgage payments.  
Seek the help of a Mortgage Lender as soon as you decide you wish to buy.  Don't go it alone.   
Get the assistanceinfo, and facts you need to buy successfully, fluidly, and with the best mortgage options available to you. 
* Hoping to buy or refinance a home or investment property in New Lenox - Will County or elsewhere in the Chicagoland - IL - WI area?

Contact me today. I'll put my 40+ years of mortgage experience hard to work on your behalf.
I'm easily found at:
Gene Mundt
Mortgage Lender - NMLS #216987 - IL Lic. #0006220 - WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281


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Gene Mundt

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Shirley Coomer 10/19/2019 06:20 AM
Home Buying
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1st Time Buyers
student loans
mortgage advice
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homebuying tips and advice
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Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good evening Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - This actually had my head spinning.  I am glad that you laid it all our.

Oct 18, 2019 05:53 PM #4
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Gene- another well written and informative post!!! This proves why it is so important to work with a professional lender can help provide the kind of information you need. 

Oct 18, 2019 06:00 PM #5
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Student loans are pretty inevitable, It seems these days. Good luck to everybody dealing with this.

Oct 18, 2019 09:58 PM #6
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Kathy Streib Yeah, you definitely have you deal with an absolute professional or a group of them for sure!

Oct 18, 2019 09:59 PM #7
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Gene, you can’t be the only one and you certainly were not in this case Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

Oct 18, 2019 10:01 PM #8
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Hi Gene... now this was a major eye-opener! Student loans were not that complicated back in the mid-1960's when I was in college. And our grands were all fortunate enough to graduate with a minimum of loans that were quickly paid off.

Oct 19, 2019 05:15 AM #13
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Gene. Thanks, I got it. The answer that is: 815.524.2280! Easy peasey. Enjoy your day!

Oct 19, 2019 05:37 AM #14
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Thank you for a  fastastic article that is one of the most comprehensive articels I have seen. Student debt is a huge issue.  I  look forward to reblogging this!

Oct 19, 2019 06:18 AM #15
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Student loan debt in our country is a big problem. It's heartbreaking to see so many young people burdened with huge student loans. Something needs to be done, in my opinion. I sure appreciate your overview of all the different "species" of loans too. You are the one to call. D 

Oct 19, 2019 06:40 AM #16
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

I cannot escape the thought of how student loans and drug dealers who give your first puff or snort for free are similar. After the free they hook & charge you big money until you are in debt and bondage. I was offered "student money" consisting of loans and grants in college and the first thing I asked is does any of this have to be paid back? The way it was offered said no but the reality and truth of it all said only the loans have to be paid the grants are free. I took the grants...All this takes place in a split second from the offer being made and people are always vulnerable when in need. What student doesn't need or want money? This is temptation disguised as good for the many. Yes for some it works out. It gets worse when you find out that even bankruptcy cannot free you from this pay back or else addiction

Oct 19, 2019 07:03 AM #17
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Gene,

Just like DNA analysis has been a blessing for studying birds and other species, maybe you need to use a similar tool to analyse the student loan before you, so you can have a better idea about how to move forward.

Oct 19, 2019 07:09 AM #18
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

This is excellent information to understand. Thanks for your time. I will use this post to become a better informed lender regarding student loan debt. 

Oct 19, 2019 08:18 AM #19
Stephen Turner
Gemcraft Homes (TriCorner Realty) - York, PA

great article! Thanks for sharing this valuable info. A good read for lenders, agents, and Consumers!

Oct 19, 2019 08:34 AM #20
John Juarez
The Medford Real Estate Team - Fremont, CA

Thanks for the information, Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi 

I have not run into a buyer for whom student loan debt has been an issue. Yet, I will have to remember to ask my buyer clients whether they have student debt and make sure that they align themselves with a loan officer who knows their way around such a situation.

Oct 19, 2019 09:20 AM #21
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Gene - I'll add another WOW reaction in praise of  the completeness found in this post.  I like the bird analogy intro too as it relates to abundant number and differences of student loans "out there".

Oct 19, 2019 09:39 AM #22
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

There are so many people carrying student debt who think they cannot buy homes, this post at least shows that you can, but it also depends on how the loan was taken and reported. An excellent post, thank you for the clarity is shares.

Oct 19, 2019 09:43 AM #23
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH

Wow! Great information, thanks for sharing!

And not only is there subtle variations in Student Loans themselves, but their repayment plans, program details, and the impact they take on Mortgage Loan Applicants can also be drastically different.  Those differences can prove challenging ... not only when trying to understand them ... but when considering their use and their short and long term ramification to payments and finances.

Oct 19, 2019 12:32 PM #24
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Good read Gene. It sounds like parents and students should talk to a mortgage lender before they take out a student loan. I know that sounds crazy, but an ounce of prevention is worth a pound of cure

Oct 21, 2019 08:17 AM #31
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Referring to student loan types as species is something very unique and kind of cool lol!

Nov 02, 2019 10:20 PM #46
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

@tombai It’s definitely a better one than I could come up with! Pretty darn good idea right there!

Nov 02, 2019 10:21 PM #47
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