By Alex Rodino, REALTOR® | Georgia real estate license #443565 | U.S. Army veteran
Last updated: October 2026
When a credit report shows a $0 monthly payment on a student loan, HUD’s FHA handbook tells the lender to count 0.5 percent of the outstanding balance as the monthly payment, unless written documentation shows the loan has been forgiven, canceled, discharged or paid in full.
FHA requires lenders to include all student loans regardless of payment type or status, subject to the documented exclusion below. Under FHA’s 0.5 percent rule, a student loan showing a $0 monthly payment on the credit report is counted at 0.5 percent of the outstanding balance each month. When the reported payment is above zero, the lender uses that payment or the actual documented payment. An upcoming deadline removes a narrow COVID-era exception by November 10, 2026, without changing the balance formula. I ask buyers to review their student-loan paperwork with their lender before we start touring.
FHA counts every student loan
In brief: FHA starts by including all student loans in a borrower’s liabilities, regardless of payment type or payment status. A deferred payment does not, by itself, remove the debt from consideration. Written proof that the balance is forgiven, canceled, discharged or paid in full supports a separate exclusion.
HUD defines a student loan as a liability incurred for educational purposes, and its Handbook 4000.1, II.A.4.b.iv(H)(1) and (2), requires the lender to include all of them. A separate paragraph, (H)(4), sets how the lender calculates the monthly obligation. Start with both questions when you speak to a licensed mortgage professional.
What payment the lender uses
In brief: When a credit report shows a $0 monthly payment on a student loan, HUD’s FHA handbook tells the lender to count 0.5 percent of the outstanding balance as the monthly payment, unless written documentation shows the loan has been forgiven, canceled, discharged or paid in full.
| What the credit report or your paperwork shows | Payment the lender uses | Handbook text |
|---|---|---|
| A payment above $0 | The reported payment or actual documented payment, when above zero. | “the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero” |
| A reported monthly payment of $0 | 0.5 percent of the outstanding loan balance. | “0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero.” |
| Written proof of forgiveness, cancellation, discharge or payment in full | The payment may be excluded. | “written documentation from the student loan program, creditor, or student loan servicer” |
| An actual payment lower than the report shows | Requires written documentation from the creditor or student loan servicer. | “the actual monthly payment, the payment status, and evidence of the outstanding balance and terms” |
Source: HUD Handbook 4000.1, II.A.4.b.iv(H) and II.A.5.a.iv(G), Update 18 (August 12, 2026).
Illustrative example of the formula, not a reader’s numbers: on a $40,000 outstanding student-loan balance, $40,000 × (0.5 ÷ 100) = $200 a month counted under the formula.
This is a student-loan calculation, not a mortgage payment, servicer bill or approval result.
Getting a loan left out
In brief: The lender may exclude the student-loan payment when written documentation shows the balance has been forgiven, canceled, discharged or otherwise paid in full. That documentation must come from the student loan program, creditor or student loan servicer. A paused payment alone does not establish any of those conditions.
The wording matters: HUD says the lender “may exclude” the payment. Bring the evidence to your lender and ask whether it satisfies section II.A.4.b.iv(H)(3). Do not assume a verbal explanation replaces the written documentation.
What changes by November 10, 2026
In brief: A COVID-era exception for suspended payments is gone from Update 18; lenders may stop using it now and must by November 10, 2026. The 0.5 percent rule does not change. This upcoming implementation deadline concerns the exception, not a new formula for all student loans.
Update 17, II.A.4.b.iv(H)(4), allowed a reported or documented payment from before a COVID-relief suspension when that payment was above zero. Update 18 deletes that exception in both underwriting sections. Its transmittal, section 3, permits immediate implementation and sets the deadline above. The same deadline applies to Update 18’s change to the FHA single-unit condo approval checklist.
What to bring your lender
In brief: For an actual payment below the credit-report payment, gather written evidence of the payment, its status, the outstanding balance and the terms from your creditor or servicer. If you seek exclusion, bring written evidence from the program, creditor or servicer showing the balance was forgiven, canceled, discharged or paid in full.
- Actual monthly payment and payment status.
- Evidence of the outstanding balance and terms.
- If applicable, documentation of forgiveness, cancellation, discharge or payment in full.
These items follow HUD’s required-documentation sections, II.A.4.b.iv(H)(3) and II.A.5.a.iv(G)(3). Ask your lender which documents will establish those facts.
Where this shows up in a home search: I want the lender’s student-loan review addressed before we plan an offer. My role is to help with the property search and contract timing. For broader planning, see Georgia first-time buyer programs and what a first home in Savannah really costs. Our VA vs FHA vs conventional loans guide is related reading.
This article explains general VA and FHA program rules for education only. It is not lending, legal, tax or financial advice and is not an offer or commitment to lend. Lenders may apply stricter requirements of their own. Talk to a licensed mortgage professional about your situation. Alex Rodino is a REALTOR® with Keller Williams Realty Coastal Area Partners, Georgia real estate license #443565. Equal Housing Opportunity.
Frequently asked questions
In brief: The key distinctions are the reported payment, the documented payment and whether the balance has been resolved. Deferred status alone does not remove a student loan. The same calculation appears in FHA’s manual-underwriting section, and the upcoming COVID-exception deadline leaves that calculation unchanged.
How does FHA calculate a student loan payment of $0?
FHA’s handbook uses 0.5 percent of the outstanding balance when the credit report shows a zero monthly student-loan payment. That is the general calculation in II.A.4.b.iv(H)(4), also repeated in the manual-underwriting section. A documented forgiven, canceled, discharged or fully paid balance may support exclusion. Ask your lender to review your credit report and supporting paperwork, since the lender applies the rule to your own file.
Do deferred student loans count on an FHA loan?
Deferred student loans are included under FHA’s rule regardless of payment status. Deferral alone does not satisfy the documentation requirement for excluding a resolved balance. The lender then applies the monthly-obligation calculation in II.A.4.b.iv(H)(4): an above-zero reported or documented payment, or the balance formula when the reported payment is zero. Bring questions about the specific report entry to your lender before treating the debt as excluded.
Can a forgiven student loan be left out on an FHA loan?
A forgiven student-loan payment may be excluded with the written documentation HUD requires. Section II.A.4.b.iv(H)(3) calls for documentation from the student loan program, creditor or student loan servicer indicating that the balance has been forgiven, canceled, discharged or otherwise paid in full. Give that evidence to the lender for review. The rule concerns a documented resolution of the balance, not simply a period without payments.
What if my actual student loan payment is lower than my credit report shows?
Using a lower payment requires written documentation from the creditor or student loan servicer. HUD requires the actual monthly payment, payment status, and evidence of the outstanding balance and terms under II.A.4.b.iv(H)(3). The calculation separately allows an actual documented payment when it is above zero. Ask the lender to review both provisions together rather than assuming that any lower amount, including zero, replaces the applicable calculation.
Does FHA use the same rule for manually underwritten loans?
FHA’s manual-underwriting section contains the same student-loan calculation. Handbook 4000.1, II.A.5.a.iv(G)(4), uses the above-zero reported or documented payment, or 0.5 percent of the outstanding balance when the credit report shows zero. Its documentation section also addresses lower payments and resolved balances. This confirms the student-loan treatment in both sections; it does not determine how your mortgage application will be underwritten or whether it will be approved.
Did FHA's student loan rule change in 2026?
Update 18 removes a COVID-era suspended-payment exception but keeps the 0.5 percent calculation unchanged. The earlier exception allowed an above-zero reported or documented payment from before the suspension. Lenders may implement its removal immediately and must do so by November 10, 2026, under the transmittal’s rule for other changes. That is an upcoming implementation deadline, not a new student-loan percentage taking effect on that date.
Planning an FHA purchase in Coastal Georgia?
In brief: Start with your lender’s review of the student-loan paperwork, then build the property search and offer timeline around your plans. I can help you look for a home and work through the contract. Questions about how the debt is counted belong with a licensed mortgage professional. You can also browse more Coastal Georgia buyer guides on the ARC blog.
Learn about buying a home with Alex, call 912-351-8935, text 912-210-8967, or contact Alex to discuss your home search.
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