VA's New Policy for Student Loan Debts and Obligations


The VA published its new policy regarding Student loans in repayment or, to begin repayment within 12 months of a VA loan closing via Circular #26-17-02 on Monday, January 23, 2017.

  • Deferred Student Loans: If the Veteran or the other co-borrowing spouse provides written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered in the debt-to-income ratio.

  • Student loans in repayment or scheduled to begin within 12 months from the date of VA loan closing: The underwriter must consider the anticipated monthly obligation in the debt-to-income ratio and utilize the payment established by either of the two calculations described in the below. Calculate each loan at a rate of 5 percent of the outstanding balance divided by 12 months (example: $25,000 student loan balance x 5% = $1,250 divided by 12 months = $104.17 per month is the monthly payment for debt ratio purposes):

1. The underwriter must use the payment(s) reported on the credit report for each student loan(s) if the reported payment is greater than the threshold payment calculation above.

2. If the payment reported on the credit report is less than the threshold payment calculation above, the loan file must contain a statement from the student loan servicer that reflects the actual loan terms and payment information for each student loan. The statement must be dated within 60 days of VA loan closing and maybe an electronic copy from the student loan servicer's website or a printed statement provided by the student loan servicer (the lender may also ask for a credit supplement to verify this information at its discretion).

This policy is effective immediately and our VA guidelines will be updated to reflect the above policy changes. To access the Circular please go to http://www.benefits.va.gov/homeloans/resources_circulars.asp


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