FHA Announces New Guidelines For Student Loans

Can the new guidelines for student loans help me buy a house?

Student loan debt graphicYou have sky-high student loan debt and want to purchase a home. You did some reading on mortgages and discovered that an FHA loan requires just a 3.5 percent down payment.

Additionally, you heard about closing expenses paid by the seller, lender concessions, and gift money. An FHA loan does seem like the ideal mortgage. You also learned about the debt-to-income ratio. If you're unfamiliar with the term debt to income, lenders compare the amount of monthly debt to monthly income. Payments on student loans are included into the calculation.

Prior to August 16, 2021, the student loan guidelines severely restricted prospective home buyers who accumulated substantial student loan debt.

Thankfully, the Federal Housing Administration (FHA) updated its student loan guidelines.

The change makes it easier for borrowers with student loans to qualify not just for FHA home loans, but also for greater loan amounts.

FHA Student Loan Calculation

The lender must take the following actions for all outstanding student loans, regardless of payment status:

  • the payment amount indicated on the credit report, when the payment amount is more than zero, or
  • the actual stated payment; or
  • if the student loan is in deferral or the credit report indicates that the borrower has not made any payments, the new FHA guidelines will estimate a monthly payment equal to 0.5 percent of the outstanding amount of the student loan.

What if the payment on my credit report is less than the payment on my student loan?

Student loan payments that are lower than those shown on the applicant's credit report must be verified by the creditor or student loan servicer in writing. The lender must also show proof of the outstanding amount and conditions of the loan.

Explanations of how to calculate a student loan's monthly payment in compliance with FHA rules

The new FHA regulation permits lenders to utilize either the actual payment shown on a credit report if it is more than zero or.5% of the loan total. Following are some examples:

  1. Payment appears on the credit report – The student loan payment of $300 is reported on the credit report. Joyce owes more over $200,000 in student loan debt. The lender will use the actual payment amount shown on her credit report.

  2. Payment not on credit report. John owes $50,000 on his school loans, and his credit record does not reflect a monthly payment. When calculating John's debt-to-income ratio, the lender will utilize a payment of $250 ($50,000 X.5%).

  3. Payment $0 on credit report. Kathy owes the federal government $70,000 in student loans. Her credit report does not list a monthly payment(s). Unless Kathy requests a recalculation of her monthly payment owing to a major change in income or family size, the lender will use $350 as her payment amount ($70,000 X .5%).

  4. Loan in deferment. Trudy is $100,000 in debt to the federal government for student loans. Her credit report indicates that her bills are deferred. After the deferral period expires, the loan officer will use a monthly payment of $500 until the loan servicer sends her a payment schedule indicating a reduced payment amount under an income-driven repayment plan.


In conclusion, the new FHA guidelines for student loans should make it easier for more people to buy a home. This is great news, especially considering the current state of the housing market. If you are thinking about buying a home, be sure to talk to your lender about getting a mortgage loan that is right for you.