VA Loan-How do they treat IBR student loan

[Anonymous]

Hi! Can anyone help me with exactly how the VA calculates student loan payments in evaluating DTI when the borrower is on IBR and the payment is 0? I can't seem to find any solid information on google, just a bunch of different answers!

My IBR re-certs every year, so it runs 2/1/2018-2/1/2019 and so on. My credit report shows what the standard monthly payments would be though, it does not mention anything about the IBR. So looking at my credit report, I have $667 in student loan payments, which I obviously do not.

So how will the VA calculate this? Any advice? I am in Mass. Thanks!

[MauiMan85297]

If your payment is showing zero they will take 1% of your student loan debt and count it against your DTI.

Example: $50,000 student loans= $500 per month against you for monthly debt.  If it shows a monthly payment on the CR they will use that.

[VALoanMaster]

Hi Dsnymom7,

Here are the actual VA guidelines:

a. If the Veteran or other borrower provides written evidence that the Student Loan debt will be deferred at least 12 months beyond the date of closing a VA Loan, a monthly payment does not need to be considered.

b. If a Student Loan is in repayment or scheduled to begin within 12 months from the date of a VA Loan closing, the lender must consider the anticipated monthly obligation in theVA Loan analysis and utilize the payment established in paragraph (1) or (2) below. Calculate each loan at a rate of 5 percent of the outstanding balance divided by 12 months (example: $25,000 student loan balance x 5% = $1,250 divided by 12 months = $104.17 per month is the monthly payment for debt ratio purposes).

(1) The lender must use the payment(s) reported on the credit report for each Student Loan(s) if the reported payment is greater than the threshold payment calculation above.

(2) If the payment reported on the credit report is less than the threshold payment calculation above, the loan file must contain a statement from the Student Loan servicer that reflects the actual loan terms and payment information for each Student Loan(s). The statement(s) must be dated within 60 days of VA Loan closing and maybe an electronic copy from the Student Loan servicer’s website or a printed statement provided by the Student Loan servicer. It is the lender’s discretion as to whether the credit report should be supplemented with this information.

[Anonymous]

OK, so if I am reading that correctly, the lender must use either that calculation you mentioned OR the payment showing on my credit report, whichever is higher? That calculation puts me at about $280, but what shows on my credit report is much higher.

The credit reports do not update to reflect an IBR, they just show what my standard 10-year repayment ammount would be.

Ok, how about if I did this? entered into a extended graduated repayment plan? This type of plan starts off with a lower monthly payment and gradually increases every two years. So my payment would be $300 for two years. If I did this, would I be able to use this payment ammount for calculating my DTI?

[VALoanMaster]

---

@Anonymouswrote:

OK, so if I am reading that correctly, the lender must use either that calculation you mentioned OR the payment showing on my credit report, whichever is higher? That calculation puts me at about $280, but what shows on my credit report is much higher.

The credit reports do not update to reflect an IBR, they just show what my standard 10-year repayment ammount would be.

Ok, how about if I did this? entered into a extended graduated repayment plan? This type of plan starts off with a lower monthly payment and gradually increases every two years. So my payment would be $300 for two years. If I did this, would I be able to use this payment ammount for calculating my DTI?

---

It would depend on how the letter breaks down the payment. I would need to see the letter & then confer with an underwriter & probably VA.