Key takeaways
Student loan debt, which impacts your debt-to-income ratio, can make it more difficult to get approved for a mortgage. Having student loan payments can also make it challenging to save for a down payment on a home.
It's not legal, and lenders won't allow you to do it.
In an extreme case, yes. If you default on student loans, one of the consequences can be a lien on your assets, including a house. (The federal government has done this in the past.)
Dependent Income: If you are full-time student and a dependent, any money you earn won't be counted in your household's income to determine rent. Any loans you receive also won't be counted as income if the borrower or co-borrower is a member of the household.
(b) Annual income includes, but is not limited to: (1) The full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services; (2) The net income from the operation of a business or profession.
Student loan money can be used to pay for room and board, whether it's on- or off-campus housing. So the short answer is, yes, students can use money from federal or private student loans to pay their monthly rent or any other living costs.
Both federal and private student loans fall off your credit report about seven years after your last payment or date of default. You default after nine months of nonpayment for federal student loans, and you're not in deferment or forbearance.
If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability. Also, the government can collect on your loans by taking funds from your wages, tax refunds, and other government payments.
Under certain federal programs, it's possible to get your student loans forgiven after 20 years of qualified payments. Private student loans, however, typically don't have forgiveness options, regardless of how long you pay them.
However, buying a house with $100,000 in student loans (or more!) is possible. To take the first steps toward homeownership, you'll need to understand how your student loans impact your credit score and eligibility for a mortgage. From there, you can follow five steps to get you closer to owning your dream home.
FHA loans, offered through HUD, have features that can be particularly useful for college students. You can qualify with a median FICO® Score of 580 or better if you have a relatively low DTI. If your FICO® Score is 620 or higher, you can qualify with a higher DTI than most other loans, except VA loans.
In the most extreme cases, using student loan money improperly is a crime. People convicted of financial aid fraud can end up in jail.
Student loans are a type of installment loan, similar to a car loan, personal loan, or mortgage. They are part of your credit report, and can impact your payment history, length of your credit history and credit mix. Paying on time could help your score.
Cosigning a student loan can affect the cosigner's ability to qualify for a new mortgage or refinance a current mortgage. In addition, as a cosigner, you could face higher interest rates or be denied a mortgage altogether.
The average federal student loan debt is $37,853 per borrower. Outstanding private student loan debt totals $128.8 billion. The average student borrows over $30,000 to pursue a bachelor's degree.
When you fall behind on payments, there's no property for the lender to take. The bank has to sue you and get an order from a judge before taking any of your property. Student loans are unsecured loans. As a result, student loans can't take your house if you make your payments on time.
The police won't come after you if you miss a payment. While you can be sued over defaulted student loans, this would be a civil case — not a criminal one. As a result, you don't have to worry about doing any jail time if you lose.
Private student loans don't go away unless you pay them off, but in most cases, they'll fall off your credit report after seven years. But keep in mind that lenders can still contact you to collect an old debt, even if it's decades old and they can no longer take you to court over it.
At what age do student loans get written off? There is no specific age when students get their loans written off in the United States, but federal undergraduate loans are forgiven after 20 years, and federal graduate school loans are forgiven after 25 years.
If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., at least 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.
It's important to note that student loans usually don't affect your ability to qualify for a mortgage any differently than other types of debt you have on your credit report, such as credit card debt and auto loans.
Federal student aid from the Department of Education covers such expenses as tuition and fees, housing and food, books and supplies, and transportation. Aid can also help pay for other related expenses, such as a computer and dependent care.
According to FHA student loan guidelines, student loans must be considered when calculating your DTI, no matter the status of repayment or repayment plan. Typically your regular monthly payment would be included if you're in current repayment.