Get Mortgage-Ready: Freddie Mac Unveils All-New Student Loan Rules!
Earlier this month, Freddie Mac, one of the two large government-sponsored enterprises that buy many mortgages in the U.S., issued guidelines stating that borrowers with outstanding student loan debt should, in most cases, have a reported payment amount greater than zero. This applies even if the borrower's income is so low that they technically qualify for zero payments.
That means the reported student loan payment should match the amount listed on the borrower's credit report --unless that amount is zero, or they can provide additional documentation beyond the credit report to support a different payment amount.
This policy change is mainly in response to the end of pandemic-related forbearance programs for education debt. These programs temporarily halted student loan payments.
For borrowers facing financial challenges and seeking relief as they transition from pandemic-related forbearance, student loans with payments adjusted based on income may offer a favorable option.
Recent adjustments to income-based student loans have expanded eligibility for $0 monthly payments.
Certain exceptions allow student loan payments to be entirely excluded from debt-to-income calculations affecting mortgage borrower eligibility.
These exceptions include:
- Where only ten or fewer payments remain before loan forgiveness, cancellation, discharge, or full repayment
- Where a loan is temporarily paused due to deferral or forbearance and is anticipated to be written off entirely.
As of the time of writing, Fannie Mae, a counterpart to Freddie Mac, still permits lenders to report a zero payment for student loans.