Qualifying for a mortgage with income based student loans

Fannie Mae Mortgage Student Loans

Fannie Mae Student Loans

Yes, it is possible to qualify for a Fannie Mae Mortgage or refinance if you have student loans.

The challenge is that your lender, specifically the person doing the underwriting of your loan, has to understand the Fannie Mae Student Loan Guidelines.

Unfortunately, there are far too many underwriters who don’t understand those guidelines and instead use a guideline from the FHA (a different kind of loan) and end up denying your loan when they should have approved it.

Why Is It Sometimes Hard To Get A Fannie Mae Mortgage When You Have Student Loans?

Fannie Mae’s underwriting guidelines have changed several times since student loan repayment plans became a problem after June 2015.

You may have already received conflicting information about your home loan options, or how your student loans are calculated when qualifying for a Fannie Mae mortgage. You may have been told about the 1% rule.

It is not uncommon for inexperienced loan officers to use the guidelines of one loan program, like FHA (1% rule), and incorrectly apply them to your conventional loan application.

2020 Guide to Qualifying for a Mortgage with Student Loans

We’re going to set the record straight today by talking about student loan guidelines when applying for a Fannie Mae conventional mortgage.

The key is what your underwriter considers your required monthly student loan payment to be. If they get it wrong, your loan can be denied because the key number they use to calculate your debt-to-income ratio will be inaccurate. 

It is important that they get it right, following Fannie Mae’s Student Loan Guidelines, NOT the guideline from the FHA, which doesn’t apply to Fannie Mae loans and is more restrictive.

Fannie Mae Student Loan Guidelines

Fannie Mae student loan guidelines fall into two categories, looking at how much you are expected to repay on your student loan each month:

  • Are You Currently In A Student Loan Repayment Plan?  (even if the income-based payment is $0)
  • Is Your Student Loan Currently in Deferment or Forbearance?

Are You Currently In A Student Loan Repayment Plan?

These guidelines apply if you are currently required to make payments on your student loans (i.e. you are not in deferment or forbearance.

If a monthly student loan payment is reported on the credit report, the underwriter may use that amount for qualifying purposes as long as it accurately reflects your current payment.  If your credit report does not reflect the correct monthly payment, the underwriter may use the monthly payment that is on the student loan documentation (the most recent student loan statement). 

If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the underwriter must determine the qualifying monthly payment using one of the options below.

If you are on an income-driven payment plan, you can provide the underwriter with student loan documentation from your servicer to verify the actual monthly payment is $0. The underwriter may then qualify you with a $0 payment.

Is Your Student Loan Currently Deferred or In Forbearance?

For deferred loans or loans in forbearance, the lender may calculate a payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment), or a fully amortizing payment using the documented loan repayment terms.

Why Do Lenders Get it Wrong?

In our Guide to Qualifying for a Mortgage with Student Loans, you’ll read hundreds of stories from readers of this website about inexperienced loan officers and lenders that get it wrong.

Get Introduced to a Student Loan Mortgage Expert Now

By far, the single biggest mistake that inexperienced loan officers make is using FHA’s 1% rule for all student loans, all the time.

It’s heartbreaking to think that the folks that found us are just a small sample of what is probably a much bigger number of people that believed the loan officer when they said no, giving up on the dream of homeownership or a lower interest rate.

The simple fact of the matter is that there are different rules for qualifying for a mortgage with student loans depending on what kind of loan you’re applying for, and what kind of payment plan you have.

Your qualifying options are often limited to the experience of the loan officer that you’re talking to. So, the next logical question is, how do you avoid having your options limited?

If you called your lender from an online internet ad, TV or radio commercial, then you are more often than not speaking to someone in a call center with little to no actual experience looking up underwriting guidelines.

Frequently Asked Questions

Does Fannie Mae Do Student Loans?

No, Fannie Mae only deals with mortgage loans. Fannie Mae (and a similar institution called Freddie Mac) buy mortgage loans from mortgage lenders, allowing those lenders to have the funds to make more loans. This makes it easier for people to get a mortgage loan.

What Is Sallie Mae?

Sallie Mae is a private bank that offers student loans and other products like credit cards and online savings accounts.

Are Sallie Mae and Fannie Mae Related?

Despite the similarity in their names, Fannie Mae and Sallie Mae are not related. Sallie Mae is a consumer bank that offers student loans and other banking services. Fannie Mae buys mortgages from lenders, giving them the cash they need to give mortgages to more people.

Have Questions About Student Loans Or Other Mortgage Issues?

We’d like to help. You can Ask Your Question here and we will connect you with a Mortgage Expert in your area that can help.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

Do You Have Questions About Qualifying?

Find a Mortgage Expert Near You

Find a Mortgage Expert by State





























New Hampshire

New Jersey





Rhode Island

South Carolina

New Mexico

New York

North Carolina

North Dakota

South Dakota







Washington DC

West Virginia



  • Joann says:

    I started consolidating my student loans in march but because of pandemic I just received what my payment will be once student loans are not in forbearance…last month I paid my first pmt which was more than was due and will continue this going forward…I applied for a mortgage and was told that they wld have to calculate 1% of student loans to calculate DTI which caused me to be denied a mortgage

    • Scott Schang says:

      Hi Joann, either your loan officer does not have experience with the student loan guidelines, or (which is kind of the same problem) your loan officer is only looking at FHA, and not trying to get you approved for a conventional loan.

      Using FHA financing, unless the repayment plan will pay the loan off at the end of a fixed term, you have to use 1% of the balance to qualify.

      Both Fannie Mae & Freddie Mac underwriting guidelines will allow a payment based on your income.

      If you would like an introduction to someone I know and trust that has experience with these guidelines, shoot me an email to scott@findmywayhome.com and let me know what State you’re trying to buy in.

      Hope this helps?

  • sc says:

    I am in a IBR for my student loans with a $0.00 payment. My lender told me that ALL types of loans will use the 1% payment amount. I have all the documentation from my student loan company stating that my payment is $0. Isn’t there some type of loans that will use the $0 or at least .5% instead of the 1%?

    • Scott Schang says:

      Hi Stephanie, as long as your student loans are currently in repayment status and not under administrative forbearance, you can absolutely qualify for a Conventional loan using your $0 payment. Are you eligible for PSLF or some other employer contingent student loan forgiveness plan? If so, that opens up additional options as well.

      I am happy to introduce you to someone that I know and trust that has experience with these student loan guidelines.

      If you would like an introduction, please shoot me an email to scott@findmywayhome.com and I will make an introduction by email.

      Hope this helps?