Student Loan Payment Calculation on Fannie Mae Transactions

Fannie Mae has clarified the options available when determining the student loan payment amount used in the DTI calculation in Fannie Mae Announcement SEL-2016-04 issued May 31, 2016.

All student loans, regardless of loan payment status (deferred, in forbearance, or in repayment) must be included in the borrower’s DTI calculation.

The following options are available (options 3 & 4 were added as clarification):

  1.  The actual fully amortizing payment  (as identified on the credit report, the student loan lender, or the borrower’s  repayment letter/forbearance agreement), or
  2.  1% of the outstanding loan balance, or
  3.  A calculated payment that will fully amortize the loan based on the documented loan repayment terms, or
  4.  If the repayment terms are unknown, a calculated payment that will fully amortize the loan(s) based on the current   prevailing student loan interest rate (see link below) and the allowable repayment period terms (see Calculating a  Student Loan Repayment table below).

NOTE:  Refer the U.S. Department of Education Federal Student Aid website and select “What are the interest rates for federal student loans