Student Loan Deferment and Forbearance: DTI Rules by Loan Program

A student loan in deferment or forbearance still shows up on your mortgage application, even when your actual bill is zero. Each loan program handles student loan deferment in the mortgage DTI calculation differently: Fannie Mae imputes 1% of the balance, FHA and USDA use 0.5%, VA can exclude the payment entirely, and in every program a documented income-driven payment above zero generally replaces the formula. On a $50,000 balance, that gap runs from $0 to $500 a month in phantom debt, which is why the rule you fall under matters more than most borrowers realize.

What Each Loan Program Plugs In for a Deferred Student Loan

Fannie Mae

When your student loan is deferred or in forbearance, Fannie Mae lets the lender use either 1% of the outstanding balance or a fully amortizing payment based on documented repayment terms.¹ On a $40,000 balance, the 1% method adds $400 a month to your DTI.

If you’re on an income-driven repayment plan and a payment above zero shows on your credit report, the lender can use that figure instead. A borrower with $60,000 in student debt and a $150 IDR payment avoids the $600 the 1% formula would otherwise produce. That $450 gap feeds directly into how much mortgage you qualify for.¹

Freddie Mac

Freddie Mac updated its guidelines in 2023 to require that a payment greater than zero be included in the DTI ratio for all student loans.² A documented IDR payment on the credit report can be used; if no payment is reported or the loan is deferred, the lender applies a calculated amount based on loan terms. Ask your lender which investor’s rules they’re following, because that choice decides which figure lands in your DTI.

FHA

FHA uses a friendlier formula than Fannie Mae. Under Mortgagee Letter 2021-13, when your credit report shows a zero monthly payment, the lender uses 0.5% of the outstanding balance.³ That same $40,000 balance costs you $200 a month under FHA versus $400 under Fannie Mae.

When your credit report or servicer documentation shows a payment above zero, the lender uses that reported amount.³ An IDR payment of $100 on a $50,000 balance beats the $250 that 0.5% would generate, but only if that payment is actually visible to the lender. Without that documentation, the 0.5% default kicks in.

One point of confusion worth clearing up: some sources state FHA uses 1% of the balance. That was a proposal that never took effect. The rule in place since August 2021 is 0.5%.³

VA

VA loans offer the most generous treatment. If you can provide written evidence that your student loans will remain in deferment for at least 12 months past your mortgage closing date, the lender doesn’t count a monthly payment at all.⁴ No other program allows a full exclusion.

When the deferment won’t last that long, or the loan is in active repayment, the VA uses a floor of 5% of the outstanding balance divided by 12. On a $30,000 loan, that’s $125 a month. If the payment on your credit report is higher than the floor, the lender uses the credit report figure. If it’s lower, the lender needs a statement from your servicer showing the actual terms and payment, dated within 60 days of closing.⁴

VA loans also weigh residual income alongside DTI, so a tight ratio isn’t automatically disqualifying if you have enough left over each month after debts and living expenses.

USDA

USDA guaranteed loans use the same student loan rule as FHA: 0.5% of the outstanding balance when the reported payment is zero, or the documented payment when one is on file.⁵ The catch is that USDA caps total debt at 41%, tighter than FHA, so the favorable 0.5% figure still has to fit inside a narrower window.⁶

Why Your Balance Keeps Growing While Payments Are Paused

Every percentage-based formula above pulls from your current outstanding balance, and that balance usually isn’t sitting still. Interest keeps accruing during forbearance on every type of federal student loan. During deferment, subsidized loans are protected, but unsubsidized loans and PLUS loans continue to accumulate interest.⁷

Federal Student Aid gives this example: a $30,000 unsubsidized loan at 6% picks up $1,800 in unpaid interest during a single year of deferment. When that interest capitalizes, it gets added to principal. The new balance is $31,800, and future interest accrues on the larger number.⁷

That phantom growth flows straight into your mortgage math. A balance that moved from $50,000 to $53,000 during forbearance now generates a $265 imputed payment under FHA instead of $250, and a $530 payment under Fannie Mae instead of $500. If you can afford interest-only payments during the pause, you keep the balance flat and the imputed payment with it.

Documentation That Replaces the Formula With a Real Payment

The most effective lever you have is swapping the default percentage calculation for a documented payment under an income-driven repayment plan. In every program, an IDR payment above zero generally beats the 0.5% or 1% imputation.

Your IDR payment needs to appear on your credit report as a specific dollar amount, not as zero or deferred.
A recent servicer letter or account statement confirming the payment and plan type helps. For VA loans, that statement has to be dated within 60 days of closing.⁴
For VA borrowers, written evidence that the loan will remain deferred for at least 12 months past closing can remove the payment from DTI entirely.⁴

Without paperwork, the lender defaults to the percentage formula and any advantage from your actual repayment plan disappears. The timing is the trap: credit reports lag by a billing cycle or two, so enrolling in an IDR plan and making at least one payment needs to happen months before you apply, not weeks.

What the Rules Add Up To

For a borrower with $50,000 in deferred student loans, the monthly DTI hit ranges from $0 under a VA loan with 12-month deferment proof to $500 under Fannie Mae’s 1% rule. At a 6% mortgage rate, that $500 swing translates to roughly $83,000 in additional borrowing capacity. The rule you fall under, and whether you have the documentation to override it, is often the difference between qualifying for the house you want and being told to come back later.

1
Fannie Mae. Monthly Debt Obligations
2
Freddie Mac. Bulletin 2023-18
3
U.S. Department of Housing and Urban Development. Mortgagee Letter 2021-13
4
U.S. Department of Veterans Affairs. Circular 26-17-02 – Clarification and New Policy for Student Loan Debts and Obligations
5
United States Department of Agriculture. HB-1-3555 Chapter 11 – Ratio Analysis
6
United States Department of Agriculture. Ratio Analysis
7
Federal Student Aid. Deferment and Forbearance