On Friday June 19, 2021, the Department of Housing and Urban Development (HUD) announced changes that more appropriately calculate student loan debt when determining borrower liabilities for Federal Housing Administration (FHA) loans. NAR has long advocated for changes to FHA’s student loan policy and welcomes these changes.

According to FHA, lenders may now exclude student loan debt payment amounts from a borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.

For outstanding student loan debt, regardless of payment status, the lender must calculate the liability as either:

the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or
0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero.

HUD Press Release on Student Debt Calculation

HUD Mortgagee Letter on Student Debt Calculationpdf

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