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Michael Zuren

The Long Term Effects of Student Loan Debt on Mortgage Qualification

Friday, October 31, 2014 - Article by: Michael Zuren - American Midwest Mortgage - Message

Many recent college graduates have been unable to qualify for mortgages, auto loans, and other consumer debt because of their student loan obligations. Recent college graduates realization of impending student loan monthly repayment obligations may seem frightening. Most college graduates understand coupling their anticipated student loan payments with additional debt will pose a severe barrier in achieving their dreams. According to, nearly 60% of all college students in the calendar year 2011 -2012 accrued debt via student loans. It is estimated that in 2012, student loan debt exceeded one trillion dollars ( According to The Federal Reserve Bank of New York student loan debt is the only form of consumer debt that has increased since 2008. Student loan debt reaches its highest point in the age group of 30 to 39 year olds, nearly $30,000 (Federal Reserve Bank of New York, 2013).

Due to the student loan debt that recent college graduates have amassed, many graduates have postponed marriage and moving into their own homes well into their thirties. According to the National Health Statistic Report (2012), first-time marriages for men had risen to an average of 28.3 years old and 25.8 years old for women. According to the National Association of Realtors, in 2011 the median age of a first-time homebuyer was 31 years old. But, there are many options for recent college graduates with large student loan debt. The information below details these alternatives for individuals whose student loans are about to enter the repayment period.

If the college graduate has exhausted their forbearance and deferment options for their student loans, there are many alternative student loan repayment plans that may assist limiting their monthly payments. Empowering recent college graduates with the knowledge of student loan repayment options may give them the ability to alter their financial obligations in a manner which allows: (1) renting an apartment, (2) purchasing a home, and/or (3) marriage. The U.S. Department of Education offers multiple repayment plans for student loans based on the borrower's income. The income based repayment plans offer the lowest monthly payment options. Even if a repayment plan has already been selected, the repayment plan can be changed at any time.

According to the Federal Student Aid website, the repayment plans for direct loans and Family Federal Education Loans (FFEL) range from the standard 10 year fixed repayment plan to variable repayment options. The graduated repayment plan offers a lower payment at first, and then increases typically every two years. Extended repayment options allow up to a 25 year repayment period, whereas "Pay as You Earn" repayment plans cap monthly payments at 10% of discretionary income. Discretionary income is calculated by using the adjusted gross income and 150% of the poverty guideline based on family size and location. Income contingent repayment plan payments are calculated based on adjusted gross income, family size, and the total amount of Direct Loans. Under this program payments change with income and may continue for up to twenty-five years. The income sensitive repayment plan calculates monthly payments based on annual income. Typically, the minimum monthly payment option is $50 unless a zero monthly payment is calculated under the Income Based Repayment Plan. Any unpaid amount after 25 years of making qualified monthly payments may be forgiven but any forgiven amount may be taxable.


Copen, C. E., Daniels, K., Vespa, J., & Mosher, W. D. (2012). First Marriages in the United States: Data from the 2006-2010 National Survey of Family Growth. U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES. Centers for Disease Control and Prevention National Center for Health Statistics

Federal Student Aid

Housing and Urban Development

National Associations of Realtors. (2011). Profile-of-home-buyers-and-sellers.

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