Student loans. Everyone hates them (except the banks).
Please explain to me how you give a student with no credit large sums of money unsecured at a high interest rate with only the hope that they will graduate college parentheses attending a college with a 50% graduation rate by the way (and expect them to repay this loan at a rate 4% higher than what you would get to buy a house). But this is our government at work so would you expect anything less than stupidity. Anyway, the point of this post today is to talk about student loan debt and qualification. Student loans are becoming a huge burden on the entire economy. Student loans are not being repaid as they were originally expected. Student loans are not bankrupt-able therefore you are stuck with them for life and must pay them. They are a federal debt. Unless private. All of this being said, the guidelines now have pretty much been updated across-the-board that require lenders to count 1% of the current balance of the student loans as a payment against the borrower. Why does this matter? Well because most people do not pay payments based on 1% of the loan balance. Majority of student loans are based on adjustable rates and lower income payment income repayment schedules. The income repayment schedules, graduated payment schedules, etc are not fully amortizing schedules therefore lenders are realizing that, "hey these borrowers don't qualify for these houses because their student loan payments are going up in two or three years and they're struggling to make their house payments". Pretty much the only exception to these guidelines right now is VA which allows you to use the current established payment based on the credit report (if there is a paid current payment being made), otherwise, unless the borrower is on a fully amortized, fixed payment repayment basis, you have to use 1% of the student loan balance to qualify the borrower.
This is just another reason that you need to be sure everyone is getting qualified BEFORE house shopping. There are too many gotchas these days. Trust me! My head spins on a daily basis.