The 2014 version of this article asked whether student debt was dragging down the housing recovery. The more useful 2026 question is personal: you have a student loan balance, you want a mortgage, and you need to know exactly how a lender will count that debt. The answer varies by loan program and is shifting this year as federal repayment plans are reshuffled.

The scale, briefly

As of March 31, 2026, 42.6 million people held $1.7 trillion in federal student loans. Roughly 9 million borrowers, more than 13%, were in default, and 8.4 million, about one in five, had at least one loan in forbearance. Among buyers, the National Association of Realtors found that 43% of younger millennial buyers carried student debt with a median balance of $30,000, and 29% of older millennials with a median of $35,000. First-time buyers made up 21% of purchases in NAR’s 2025 survey, the lowest share since 1981, at a median age of 40, and they named high rent and student loans as the two costs that most held back their saving.

How the payment shows up in your debt-to-income ratio

Mortgage approval turns on the debt-to-income ratio: your monthly debt payments, including the new mortgage, divided by gross monthly income. The classic 28/36 rule is a budgeting guideline, not a lender ceiling. Fannie Mae’s automated underwriting allows conventional DTI up to 50%; FHA’s standard guideline is 31% front-end and 43% back-end, with automated approvals possible up to roughly 46.9% and 56.9% with compensating factors. A student loan enters that ratio as a monthly payment, and the payment lenders use is not always the one you make.

What each program counts, even when your payment is $0

  • Conventional, Fannie Mae. The credit-report payment is used. If it shows no payment or $0, the lender must determine one: on an income-driven plan it needs documentation that the actual payment is $0 before using $0; for loans in deferment or forbearance it uses 1% of the outstanding balance or a fully amortizing payment based on documented loan terms.
  • Conventional, Freddie Mac. When the credit report shows a $0.00 payment, including on an income-driven plan, the lender submits 0.5% of the outstanding balance as the monthly payment unless other documentation in the file supports a different amount greater than zero.
  • FHA. Since Mortgagee Letter 2021-13, carried into Handbook 4000.1: the credit-report or documented payment is used when it is above zero; otherwise 0.5% of the outstanding balance, regardless of payment status. The loan can be excluded only with written proof it was forgiven, canceled, discharged or paid in full.
  • VA. Under VA underwriting guidance first set out in Circular 26-17-02 and carried into the VA Lenders Handbook: if you show the loan is deferred at least 12 months beyond closing, no payment is counted; otherwise the threshold is 5% of the balance divided by 12 (the VA’s own example: $25,000 times 5%, divided by 12, is $104.17 a month). A higher credit-report payment is used instead, and a lower one only with a servicer statement dated within 60 days of closing.

Put a $30,000 balance, the younger-millennial median, through those rules with a $0 reported payment: Fannie Mae counts $300 a month, Freddie Mac and FHA count $150, and VA counts $125 unless the loan is deferred past the first year. That spread is why the same borrower can be approved at one shop and declined at another.

Why 2026 repayment changes matter for the credit report

The number lenders start from is the payment your servicer reports, and that is moving. The SAVE plan, which covered 7.5 million borrowers, is being wound down: starting July 1, 2026, servicers began notifying SAVE borrowers, who get a 90-day window to choose a plan or be placed in the Standard or Tiered Standard plan. The new Repayment Assistance Plan opened the same day, with payments set between 1% and 10% of income depending on earnings, reduced by $50 a month per dependent, with a $10 floor and a balance discharge after 360 on-time payments. Tiered Standard offers fixed 10-, 15-, 20- or 25-year terms based on the amount borrowed, and borrowers already in income-driven plans have until July 1, 2028 to pick RAP, Tiered Standard or IBR. Parent PLUS loans are not eligible for RAP.

For a mortgage applicant, the plan choice is also a DTI choice. A low income-driven payment helps only if the servicer reports it and your lender’s program accepts a documented actual payment; on FHA and Freddie Mac loans a reported $0 gets replaced with 0.5% of the balance anyway.

Credit score and down payment

Student loans also affect approval through the score. Payment history is 35% of a FICO score, and a student loan is often the longest-running account a young borrower has, so on-time payments build the file and a default damages it. Loans in forbearance are not delinquent, but the balance still counts in DTI under every rule above.

Then there is the down payment. Student loan payments compete directly with saving, which is the trade-off NAR’s first-time buyers described. The programs built for thin down payments are still open: FHA allows 3.5% down with a 580 score (10% down at 500–579), and conventional 3%-down programs such as HomeReady, Home Possible and Conventional 97 exist for buyers who meet their income or first-time-buyer rules. Paying a student loan down to shrink DTI, versus keeping the cash for the down payment, is a calculation to run both ways with a lender, not a rule of thumb.

What to do before you apply

  • Pull your own credit reports (free weekly at AnnualCreditReport.com) and check the payment each student loan shows; a blank or $0 payment is what triggers the 0.5% and 1% rules.
  • Get a servicer letter stating the current payment and plan, dated close to your application.
  • Ask each lender which program and which student-loan rule it will apply. A conventional loan run through Freddie Mac’s system can count half of what Fannie Mae’s does on a deferred balance.
  • Run the ratio yourself with the payment the lender will use, not the one you pay. How Much House Can You Handle in 2026? walks through the math, and the first-time buyer loan options section of our homebuying guide compares the low-down-payment programs.

Student loans are not a bar to a mortgage. They are a line item with four different price tags depending on the program, and you should know which one you are being measured by before the lender does.