Hi Heather,

I just finishing law school with a fairly high amount of debt ($90,000) and a job secured in the public sector. My plan is to spend the rest of my career in the public sector, and therefore, I am relying on PSLF and IBR. My wife and I will be looking to buy a home in the next five years. We will have enough saved at that point for the down payment. However, my student loan principal amount will still be fairly high. When a bank is evaluating me for a mortgage will they evaluate my debt-to-income ratio as based on A) my reasonable IBR payments or B) what my monthly payments would be to actually pay off the principal in full? Thank you!

How is a FICO credit score affected by outstanding student loan debt that is being managed through IBR?

I’m in the same boat, but am actively looking for a home loan. I’ve talked with 4 lenders so far with the same response from each. Despite fantabulous credit scores, closing and downpayment costs ready to go, two professional full-time jobs, and no outside credit or costs… we have nevertheless been turned down 4 times. We have a combined student loan debt from one law school degree and 4 minor degrees of ~$170,000, but thanks to IBR are currently paying $0.00. Next year we’ll be paying a manageable $600-$700/month. However, the only number the banks care about is how much the federal loan documents say we’ll owe in the future. Since the federal loan people don’t know how much we’ll earn, they instead put down the Standard Repayment amount…$1700+/month!!! So the banks look at this and say we could ‘maybe’ qualify for a $100k loan… which in New England can maybe buy you a shoe-box next to the highway. We might be able to get a “Portfolio” loan through some banks, at an increased interest rate and a mandatory 20% downpayment. Our only other option, it seems (though I would hugely appreciate anyone’s advice who knows a different way to get this to work!), is to wait another 9 years until we can get our loans forgiven through PSLF. Of course by then we could just buy the house outright! 

To speak to Patty’s question, our credit scores seem to be completely unaffected by our mountain of student loan debt or IBR repayment plan; possibly it helps…we’re both around 800.