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STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

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Credit4Growth
Senior Contributor

STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

 

I am attempting to mange DTI going forward while striving to obtain my rebuild goals.

 

Please help out to understand a repayment option which calculates the maximum monthly payment for student loans.

 

Maybe better said, which repayment options causes & calculates the highest monthly payment?

Message 1 of 7
6 REPLIES 6
ccquest
Established Contributor

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

All depends on your type of loans. If they are federal, you'll probably want to avoid any income based options as those are usually lower, a standard repayment term is probably going to be 20 years which probably won't be a crazy high payment amount either. If you want the amount to be as high as possible, refinance it to a shorter term loan if you can (might be hard with the dirty profile though).

If you are trying to manage DTI, you'll want the lowest required payment though...What you actually pay on it is another story and you almost all student loans have no prepayment penalties so go for the longest loan at the best rate you can, and pay it down faster with funds that are available.

Creditors want to know you can pay THEM, not that you HAVE to pay someone else.
as of 1/1/23
Current Cards:
Message 2 of 7
Credit4Growth
Senior Contributor

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

@ccquest 

 

 

Thank you! 

 

I am on a standard plan, as indicated in the picture I am posting.  

 

I am intentionally trying to determine, manage and maintain my DTI at a level of 8% or less prior to applying for redit with AODFCU.

 

I know you can not 100% accurately communicate their positioning however I appreciate any further opinions in which you may be able to provide:

 

Based on AOD'S perspective (who is said to use the maximum payment amount for SL in the calculations for DTI), in your opinion, they will not use the $391 amount which is based on a Graduated plan but the $268 amount based upon a Standard plan?

 

That is what I wish to clarify concerning my understanding.  

 

As my only/best option to lower my DTI further would be to close out my Navy SSL. 

 

That will defeat the purpose of having it open as my only installment account and aged when I will have my SL's balance down to $0 anywhere between early to mid 2021.

 

Details of SSL:

 

Open 8/18;  Term 60 months;  Monthly Payment amount of $264;  BAL approximately $580;  and I have been making monthly payments of $3.75 per month lately.

 

That is specifically what I have been giving thought to.

 

Relating to my Standard Repayment amount the Graduated Repayment option amount, do you have any opinions based on the information i have provided and AOD's potential perspective?

 

Thanks in advance.

 

  • SLsAmountFor DTI.jpg
Message 3 of 7
ccquest
Established Contributor

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

I believe they would use the $268 as that's your current plan and it doesn't look like that is one that is scheduled to increase over time. How do you know that AES looks at highest payment it could be on a graduated plan? If they check your credit report, I think it would only show the agreed payment as whatever it currently is at that time which would be $183. For mine serviced by Great Lakes, it just says the Tmers are: "$0 per month; paid Monthly". Previously it was reporting the scheduled payment as whatever my payment was calculated as for the year, then marking as good for the month. Nothing is showing that the monthly payment would go up.

What's your income look like? IIRC, income based payments (on federal loans, not sure this AES one is federal or not) are something like 10% of income over the median income.

For the SSL, what does it say the required payment is? I know you're paying $3.75, but if it reports a higher required payment that could be an issue. You don't need that open, because the student loans are an installment loan already.

as of 1/1/23
Current Cards:
Message 4 of 7
Credit4Growth
Senior Contributor

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

 @ccquest wrote:

I believe they would use the $268 as that's your current plan and it doesn't look like that is one that is scheduled to increase over time. - It is not scheduled to increase, also it is not on a yearly cert.  How do you know that AES looks at highest payment it could be on a graduated plan? -AODFCU not AES is what i was referring to concerning looking at the highest/maximum monthly repayment amount for SL's supposedly when they are calculating an applicant's DTI.  I will post a link to the thread in a moment or two.   If they check your credit report, I think it would only show the agreed payment  ($ it is $268)  as whatever it currently is at that time which would be $183  (to clarify, $183 was the monthly payment amount during the rehab process, which occurred while the loans where not listed  on credit reports)  or mine serviced by Great Lakes, it just says the Tmers are: "$0 per month; paid Monthly". Previously it was reporting the scheduled payment as whatever my payment was calculated as for the year, then marking as good for the month. Nothing is showing that the monthly payment would go up.

What's your income look like? ($108) IIRC, income based payments on federal loans, not sure this AES one is federal or not  (all remaining loans are federal)  are something like 10% of income over the median income.

For the SSL, what does it say the required payment is? ($264)   I know you're paying $3.75, but if it reports a higher required payment that could be an issue. (yes, I do understand that and I would also have to lower my balances - AZEO)    You don't need that open, because the student loans are an installment loan already.  (Prior to opening the SSL I had already determined I would have the means to zero the SL balance somewhere between a time period of  March 2021 through July 2021 and have the SSL remain open on the credit reports as the 1 open installment)

 

 

I have 1 CO on my reports, my intentions have been to to make my reports as *pretty as possible to increase my chances of instant/high limit approval.  In my opinion i do not wish to waste an additional HP on a CLI  down the road & it has worked quite well for me thus far. 

 

I learned about the AOD feedback from the following thread.

 

https://ficoforums.myfico.com/t5/Credit-Card-Applications/AOD-FCU-Denial-Interesting-Notes/m-p/60907...

Message 5 of 7
ccquest
Established Contributor

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION

Sorry for mixing up the two and I'm not so sure then that they look at whether it's income based or not or just calculate their own payment amount for a certain term and use that with an expectation of repayment in full because with income based, you'll never finish the loan but just speculating.

 

For when I was mentioning $183 that was just to go off using the graduated repayment plan, not the current standard term. With that income, probably wouldn't benefit you though.

 

Can you close out the SSL early? That would "free" up $264 in their eyes (unless you can reamortize it and the new payment would be in the neighborhood of $12 a month).

 

What are you trying to get out of AOD now vs March-July next year when the loans would be zeroed out?

as of 1/1/23
Current Cards:
Message 6 of 7
Anonymous
Not applicable

Re: STUDENT LOANS REPAYMENT CALCULATION & DTI QUESTION


@Credit4Growth wrote:

 

I am attempting to mange DTI going forward while striving to obtain my rebuild goals.

 

Please help out to understand a repayment option which calculates the maximum monthly payment for student loans.

 

Maybe better said, which repayment options causes & calculates the highest monthly payment?


Well unless something changed at AOD since I apllied and got denied for a CC based off my DTI, they do not care at all what you actually pay. When they calculated my DTI they stated they create the fugure, they do not go off of what I actually pay. They would not accept income based repayments since they are recertified annually and they do not care if the term is 1 year or 50 years. They do not care if you are going for forgiveness. They calculated payments at *2%* of the total balances! Insane! Even mortgages calculate 0.5%-1%. They also had a field day reducing my income to 25% of what I actually make.

 

Apparently their computers cannot calculate a payment under $25/mo for life. I have 1 bill with a total balance of $100 and they calculated that as a payment of $25/mo for *life*.

 

I strongly urge if you have lots of SLs and not enough income to water the DTI down based off at a minimum the standard repayment, but more like 2% of the total balances of all your SLs, to just avoid AOD for credit products altogether.

 

I wish I had better news.

 

Good luck!

 

Edit: just saw that they are about to be paid off. They will try to maximize your DTI vs minimize it. I would expect them to take the standard repayment even over the 2% balance if you are near payoff. I would honestly just wait until they are paid off before dealing with AOD, as they really are not SL friendly at all ime.

 

If your balance is 22.6k as listed in your siggy 2% of that is $452/mo. I would almost bet that is what they will calculate. Whatever is the higher number, expect them to go with that.

Message 7 of 7
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