Student Loan Payments Are Back: How They Impact Mortgage Qualification in 2025
- Alexi Mencio
- Oct 4, 2025
- 3 min read
For the first time in years, millions of Americans are making student loan payments again. With repayment resuming in 2025, many potential homebuyers — especially millennials and Gen Z — are asking the same question: How will my student loans affect my ability to qualify for a mortgage?
At Trust Lending, we know that student debt doesn’t have to be a dealbreaker. But it does play an important role in how lenders calculate your debt-to-income ratio (DTI) — and that can determine how much home you can afford.
How Lenders View Student Loans
When underwriting a mortgage, lenders look at your debt-to-income ratio, or the percentage of your monthly gross income that goes toward debt obligations.
Student loan payments are included in this calculation. Even if your loans are in forbearance, deferment, or on an income-based plan, lenders still assign a payment amount for DTI purposes.
Conventional Loans (Fannie Mae/Freddie Mac): Typically count the payment listed on the credit report or 1% of the loan balance if no payment is listed.
FHA Loans: Use the actual payment or 0.5% of the balance if no payment is reported.
VA Loans: Often use the actual monthly payment, but can vary by underwriter.
This means that even a modest student loan balance can impact how much mortgage you qualify for.
Example Scenario
Gross monthly income: $5,500
Student loan payment: $400
Auto loan: $300
Credit cards: $150
Total monthly debts = $850
DTI before mortgage = 15.4%
If a lender allows up to 43% DTI, that leaves room for a mortgage payment (including taxes and insurance) of about $1,825/month. Without student loans, that same borrower could qualify for roughly $2,225/month — a difference of nearly $400 in housing power.
Strategies for Buyers with Student Loans
Income-Based Repayment Plans
If you qualify, an income-driven repayment plan can reduce your monthly obligation, lowering your DTI and improving mortgage qualification.
Consolidation or Refinancing
Refinancing private student loans at a lower rate can reduce monthly payments. Be cautious with federal loans, since refinancing eliminates federal protections.
Explore FHA and VA Options
FHA uses a lower percentage assumption for non-reported payments, which can benefit borrowers. VA guidelines may also be more flexible for veterans.
Increase Income or Pay Down Other Debts
Sometimes the best solution is to improve your DTI from the other side — by boosting income or paying down credit cards/auto loans.
Work with an Experienced Lender
Different loan programs treat student loans differently. A knowledgeable lender can structure the right loan type for your situation.
The Bigger Picture in 2025
With home prices and insurance costs already weighing on affordability, the return of student loan payments adds another layer of stress for buyers. But it’s not all bad news:
Many states and employers are expanding down payment assistance programs that can offset student debt burdens.
Mortgage guidelines are evolving to account for income-based repayment plans more fairly.
First-time homebuyer programs remain a strong option for those balancing debt and entry-level housing.
Student Debt Doesn’t Mean No Homeownership
If student loan payments are cutting into your housing budget, you’re not alone. The key is knowing how lenders calculate your DTI — and what strategies can reduce the impact.
At Trust Lending, we work with borrowers every day who are managing student debt and still successfully transitioning into homeownership.
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