Student loans that are currently in repayment must have documentation to verify the current payment due (e.g. letter from a loan servicer, online account verifications, or other official written documentation). The credit report alone is not acceptable documentation. Verifications are valid for 120 days, 180 days for new construction. A fixed loan payment will not adjust over the repayment term. The payment listed on the documentation may be used for debt ratios.
Graduated repayment plans typically start with low payments and then adjust every 12 months or more. Regardless of when payment adjustments occur, lenders must utilize the highest payment documented on the repayment plan agreement in debt ratios.
Deferred student loans that are not in repayment status may use an estimated payment of 1% of the loan balance reflected on the credit report, or a verified fixed payment provided by the loan servicer to document the payment that will be due once deferment ends.
Student loans with Income Based Repayment (IBR) plans of $0 are not eligible to be used in the debt ratio. The borrower must provide documentation of the IBR payment plan from the loan servicer. The following apply:
- If the IBR payment is less than $100 and 1 percent of the total loan balance is more than $100, a minimum payment of $100 must be included in the debt ratios.
- If the IBR payment is less than $100 and 1 percent of the total loan balance is less than $100, a minimum payment of 1% of the loan balance must be included in the debt ratios.
- If the current IBR payment is over $100, use that payment amount in the debt ratios.
Senior Loan Officer
phone: (502) 905-3708