Do Deferred Student Loans Affect Debt-to-Income Ratio?

Deferred student loans do affect your debt-to-income ratio, even when your credit report shows a $0 monthly payment. Mortgage underwriters won’t treat a paused loan as if it didn’t exist. Instead, they plug a calculated payment — usually a small percentage of your outstanding balance — into your DTI. The percentage depends on the loan program, and the spread between programs is wide enough to decide whether you qualify.

Why a Paused Payment Still Counts

Your DTI is total monthly debt payments divided by gross monthly income. Lenders use it to judge whether you can carry a new mortgage payment on top of what you already owe. A deferment postpones a debt; it doesn’t erase it. Payments will restart, and if the underwriter ignored the balance, they’d be approving borrowers who might not afford the mortgage once billing resumes.

Because a credit report often lists $0 during deferment, lenders can’t rely on the reported figure. Each program has its own rule for turning the outstanding balance into an assumed monthly payment.

How Each Mortgage Program Calculates the Payment

Fannie Mae

Fannie Mae’s Selling Guide requires deferred installment debts to be included in the borrower’s recurring monthly obligations.¹ When a credit report shows $0 and the borrower has no documentation of an income-driven repayment plan, the lender uses 1% of the outstanding balance as the assumed monthly payment. On a $40,000 balance, that’s $400 added to your DTI while you pay nothing. If you can document a fully amortizing payment covering principal and interest, or a verified income-driven repayment amount, the lender can use that documented figure instead.

Freddie Mac

Freddie Mac has moved to a more borrower-friendly rule. Effective for submissions on or after February 10, 2026, when a credit report shows a $0 monthly payment on a student loan, the lender uses 0.5% of the outstanding balance rather than 1%.² The same $40,000 balance counts as $200 instead of $400. This applies whether the loan is in deferment, forbearance, or an income-driven plan showing a zero payment. If you can document a current payment amount greater than zero, the lender uses that amount.

The gap between the two conventional agencies matters. If your DTI is tight, a Freddie Mac-eligible loan might work where a Fannie Mae one won’t, purely because of how each treats the same balance. Ask your loan officer to run both.

FHA

FHA-insured mortgages follow HUD’s Single Family Housing Policy Handbook 4000.1. All student loans are included in liabilities regardless of payment status. When the credit report shows $0, the lender uses 0.5% of the outstanding balance. If the credit report shows a payment above zero, the lender uses the reported amount.³

If your actual documented payment from the loan servicer is lower than what the credit report shows, the lender can use the lower figure, but they need written documentation of the actual monthly payment, payment status, and outstanding balance directly from the servicer or creditor. The lender can also exclude the payment entirely if written documentation confirms the loan has been forgiven, canceled, or discharged.³

VA

VA-guaranteed loans have historically used a different formula. Under VA Circular 26-17-02, lenders calculated the monthly obligation by taking 5% of the outstanding balance and dividing by 12. On a $40,000 balance, that’s roughly $167. If the credit report payment was higher than that calculated figure, the lender used the credit report amount. The same circular allowed lenders to exclude a deferred student loan from DTI entirely when the borrower provided written evidence the loan would remain deferred for at least 12 months beyond the closing date.⁴

That circular was formally rescinded in January 2019 and its provisions were folded into the VA Lender’s Handbook. Confirm the current calculation method with your VA lender, since the specifics may have been updated since consolidation.

USDA

USDA rural development loans use a straightforward rule. For student loans where the credit report shows a payment above zero, the lender uses the reported amount or the actual documented payment. When the reported payment is zero, the lender uses 0.5% of the outstanding balance.⁵

Two USDA rules catch borrowers off guard. Student loans in your name that are paid by someone else still count as your liability. And loans in a forgiveness program remain your legal responsibility until the creditor formally releases you, so the applicable payment stays in your DTI until that release happens.⁵

What the Numbers Look Like Side by Side

On a $50,000 balance with a $0 reported payment, here’s what each program adds to your monthly DTI:

Fannie Mae (deferred): $500 per month, using 1% of balance
Freddie Mac: $250 per month, using 0.5% of balance
FHA: $250 per month, using 0.5% of balance
VA (historical formula): about $208 per month, using 5% of balance divided by 12
USDA: $250 per month, using 0.5% of balance

For a borrower earning $6,000 in gross monthly income, those calculated payments alone would consume between roughly 3.5% and 8.3% of DTI. Conventional lenders generally look for a total DTI below 43% to 50%, and government programs typically cap DTI around 41% to 43%. A few percentage points can move your maximum purchase price or knock you out of qualification entirely.

Income-Driven Repayment Is Not the Same as Deferment

Borrowers often leave money on the table here. Deferment and income-driven repayment are two different statuses, and some mortgage programs treat them very differently. If you’re on an income-driven plan and your calculated payment is $0 because your income is low, that documented $0 can help you.

Under Freddie Mac’s guidelines, even a $0 income-driven payment gets replaced by 0.5% of the outstanding balance for DTI purposes.² Fannie Mae, however, may allow a documented $0 income-driven payment to be used as-is, which effectively removes the student loan from your DTI calculation. That distinction alone can be the difference between qualifying and being denied. You’ll need current documentation from your servicer showing the approved payment under the plan.

FHA treats income-driven plans the same way it treats other student loans: if the credit report shows zero, the lender uses 0.5% of the balance.³ The FHA doesn’t carve out a special exception for IDR, so a documented $0 IDR payment doesn’t offer the same advantage on the FHA side.

Documentation to Have Ready

Whichever program you apply under, gather these before starting the application:

A current loan servicer statement showing outstanding balance, payment status, and monthly payment amount. Lenders rely on this most heavily.
A deferment or forbearance letter confirming the type of deferment, the start date, and when regular payments resume. VA borrowers especially may need this to show any deferment extends beyond closing.
Income-driven repayment documentation if you’re on IDR, including the approval letter with your calculated payment. A documented $0 IDR payment is treated differently than a $0 payment from deferment under some programs.
Contact information for the loan servicer. Lenders often verify directly, especially when the credit report doesn’t match your documentation.

Identify whether each loan is federal or private. Federal loans have standardized deferment and repayment options that lenders recognize; private terms vary by contract. If your credit report shows a different payment amount than your servicer statement, flag the discrepancy before the underwriter finds it. Resolving it upfront avoids delays during verification.

Ways to Reduce the DTI Impact

If deferred student loans are pushing your DTI too high, you have practical options beyond earning more.

Switching from deferment to an income-driven plan can help significantly under Fannie Mae’s rules. If your income qualifies you for a $0 or very low IDR payment and you can document it, Fannie Mae may use that documented amount rather than calculating 1% of the balance. Even under programs that don’t distinguish IDR from deferment, a low documented IDR payment can still be less than the calculated percentage.

Shopping across programs is another lever. The same borrower with the same debt can qualify for a Freddie Mac conventional loan and fail Fannie Mae’s DTI threshold, simply because Freddie Mac uses 0.5% while Fannie Mae uses 1%. Your loan officer should be running both.

Paying down the balance reduces the calculated obligation under every program, since all the formulas are balance-based. Even a partial paydown moves the number. And if you qualify for any forgiveness, cancellation, or discharge, completing and documenting it before you apply removes the debt from your DTI entirely under FHA and USDA rules.³⁵

1
Fannie Mae. Monthly Debt Obligations
2
Freddie Mac. Monthly Debt Payment-to-Income (DTI) Ratio
3
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
4
Veterans Benefits Administration. Circular 26-17-02 Clarification and New Policy for Student Loan Debts and Obligations
5
USDA Rural Development. HB-1-3555, Chapter 11 – Ratio Analysis