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Borrowers face higher student loan debt than ever before, with the class of 2015 graduating with an all time high average debt of $35,000. The country faces the highest student loan debt as well, topping $1.3 trillion. Today as a nation we face less jobs and lower wages. We see college graduates moving back home with their parents because they cannot afford to live on their own. Couples are waiting longer to get married, striving for more financial security first. The dream of owning a home for many borrowers with student loan debt has become just that, a dream.

student loan default

The two largest obstacles between borrowers and their dream house today are:

  1. Falling behind on your student loan payments
  2. Your debt-to-income ratio can crush your home-buying power

student debt usa

The first part is easier than the second, unless you have already destroyed your credit score. A credit score is a number used to determine a borrower's creditworthiness and will follow you for the rest of your life. The higher the score, the lower interest rates you face when applying for future loans. A great thing about student loans is that they are considered “good credit,” as the money you are borrowing is seen as an investment into your future versus incurring debt maxing out a credit card. The best way to positively affect your credit score is by making regular, on-time student loan payments. If payments are not made consistently and on-time, your credit score will reflect that. Every late payment, default and federal student loan delinquency against you will make it harder and harder to get a home loan.

 

Fortunately, Student Debt USA can help. The federal government has created a variety of repayment plans to help offset the price tag on a college education. Depending on the types of loans you have and your choice of career, you may be eligible for a loan forgiveness program. There are income-based repayment plans that put a limit on the percentage of your income that can go to pay your loans. Don’t let your loan repayment slip through the cracks. Let Student Debt USA know your situation and we will help you find a solution that will set you up for future financial success.

income based repayment

When looking to buy a home, a mortgage broker will look at your monthly salary compared to all your monthly payments, including your student loan debt. To get a first time homebuyer loan, your monthly payments should be under 43%. Basically, if you are spending more than 12% of your income on student loans, it is hurting your ability to buy a loan.

Today, the average borrower has $35,000 in student loans. With an average interest rate of 6.8%, you will be repaying a total of $48,333.80. Set up in an average 10 year standard repayment plan, your loan payment is $402.78 per month or $8,750.00 per year. The average salary of a new college grad is $45,327. 12% of your income would be $5,439.24. A new college grad is paying almost double that at $8,750.00 meaning that it is almost impossible to get a home loan.

If you are currently set up in a standard 10 year repayment plan, contact us today. A college education shouldn’t come at the price of a home for you and your family.

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