Deferred Student Loans and Income-Driven Repayment in Mortgage Underwriting: FHA vs. Conventional in 2026

Student loan treatment in mortgage underwriting changed significantly in 2021 and the guidelines have continued to evolve. FHA, Fannie Mae, and Freddie Mac each handle deferred loans and income-driven repayment (IDR) differently, and using the wrong methodology can either kill a deal or approve a borrower on an inaccurate DTI.

Fannie Mae Student Loan Treatment

Fannie Mae requires that the actual monthly payment on the student loan be used for DTI, regardless of whether the loan is in deferment or on an IDR plan. If the loan is deferred and there is no monthly payment currently due, Fannie Mae requires a calculated monthly payment equal to 1% of the outstanding balance, unless the lender can document the exact payment that will apply when deferment ends. A borrower with $80,000 in deferred student loans would have a $800 per month payment imputed into DTI under the 1% rule if no specific payment documentation is provided.

FHA Student Loan Treatment

• ✦FHA requires the greater of the actual payment on the credit report or 0.5% of the outstanding balance if the loan is deferred or in IDR with a $0 payment
• ✦For IDR plans with a documented monthly payment greater than zero, FHA uses the actual IDR payment
• ✦A borrower with a $0 IDR payment and $100,000 in student loan balance would have $500 per month imputed under FHA's 0.5% rule
• ✦FHA's 0.5% rule is more favorable than Fannie Mae's 1% rule and has produced increased FHA market share among borrowers with significant student debt

Freddie Mac Student Loan Treatment

Freddie Mac uses the actual payment showing on the credit report or the fully amortizing payment if the credit report shows zero. For deferred loans, Freddie Mac uses 0.5% of the outstanding balance, same as FHA. For IDR plans, Freddie Mac allows the use of the actual IDR payment if the payment is greater than zero and documented. The 0.5% rule applies only when the documented payment is $0. Freddie Mac's approach closely mirrors FHA's current treatment, making Freddie Mac a competitive option for borrowers with substantial IDR-plan student debt.