DTI and deferred student loans

Anonymous · ‎07-01-2019

I'm planning to obtain an auto loan within the next 6 months and am curious as to how student loan payments are calculated into DTI when they are in deferment.

Should I go on an income based repayment plan before applying for the auto loan?

Thank you for all of your help!

Anonymous · ‎07-01-2019

If you could list your monthly debt's that are reported to the credit bureau's, plus your rent (if you rent), as well as your gross monthly income, it might help better answer your question.

Auto lender's are all different, some won't even pay attention to deffered student loan's in terms of DTI, some will estimate a future payment based off your balances and use that to calculate DTI, and so on and so forth.

Anonymous · ‎07-02-2019

Monthly payments reported:

Credit card: $25

Small loan: $100

Student loans: deferred (balance: $62,700)

I pay a third of the rent( $500) to my parents. I'm not on the lease though.

Gross monthly income: $3330.00

Anonymous · ‎07-02-2019

What kind of vehicle are you looking at, price, down payment, what kind of scores do you have?

Anonymous · ‎07-02-2019

Deferment and forbearance do not help improve your score. You likely have blanks on your payment history during that time. In addition, the interest will continue to accrue and then capitalize. In general, it is much better to go on an Income-driven repayment (IDR) plan such as REPAYE or IBR. You can use the government's repayment estimator to see what your payments would be; it's based on your adjusted gross income. People typically benefit the most from REPAYE. This will give you 6 months of good payment to add to your credit report and an IDR plan keeps your payment from capitalizing. Additionally there are income subsidies for REPAYE and IBR. On REPAYE, the government will pay all of your interest not covered by your monthly payment for 3 years on your subsidized loans and half thereafter. It will cover 1/2 the unpaid interest on unsubsidized loans for the life of the loan. At your income and loan amount you will probably benefit from this. You might even have loan forgiveness in 20 years.
Overall, if you start paying on your student loans now, you will only benefit from it even though your payments will be low.
I'm unsure how this would affect how they see your DTI, I would just think adding to your payment history would be a good thing.

Anonymous · ‎07-05-2019

@Anonymous wrote:
Deferment and forbearance do not help improve your score. You likely have blanks on your payment history during that time. In addition, the interest will continue to accrue and then capitalize. In general, it is much better to go on an Income-driven repayment (IDR) plan such as REPAYE or IBR. You can use the government's repayment estimator to see what your payments would be; it's based on your adjusted gross income. People typically benefit the most from REPAYE. This will give you 6 months of good payment to add to your credit report and an IDR plan keeps your payment from capitalizing. Additionally there are income subsidies for REPAYE and IBR. On REPAYE, the government will pay all of your interest not covered by your monthly payment for 3 years on your subsidized loans and half thereafter. It will cover 1/2 the unpaid interest on unsubsidized loans for the life of the loan. At your income and loan amount you will probably benefit from this. You might even have loan forgiveness in 20 years.
Overall, if you start paying on your student loans now, you will only benefit from it even though your payments will be low.
I'm unsure how this would affect how they see your DTI, I would just think adding to your payment history would be a good thing.

This is excellent advice. Low income folks are very well served by these plans and should not deffer student loans because many times the payments are tiny and count towards the 20 year max. I have a substantial staff (goverment healthcare) that make low salaries and have lots of student loan debt. We educate them on these plans and student loan forgiveness programs as part of our new employee orientation. Most had no idea of the options available to them.

Anonymous · ‎09-13-2019

How did this work out for you? Where you able to get a loan?