Do Student Loans Affect Buying a House? What Your Clients Need to Know

A college education is traditionally one of the wisest investments someone can make, but it comes with a price tag that keeps climbing. In the U.S., student loan debt now tops $1.8 trillion, and with the federal repayment landscape undergoing its most significant overhaul in decades, many of your clients may be wondering whether homeownership is even on the table. Spoiler: it is. And you’re in a great position to help them see that.

For real estate professionals like yourself, the student loan conversation is becoming an increasingly important part of the buyer relationship. Clients carrying student debt may feel uncertain, discouraged, or outright convinced that homeownership is out of reach. 

Do student loans affect buying a house? Yes, but student debt doesn’t disqualify a buyer, it just adds some nuance to the path forward. With the right guidance, planning, and resources, your clients can move confidently toward their dream of owning a home.

Let’s walk through the most common concerns you’ll hear, and how to address them.

“I can’t save for a down payment while making student loan payments.”

This is the objection you’ll probably hear most often, and it’s completely understandable. Monthly student loan obligations can make it tough to set aside meaningful savings, especially in today’s economic climate. According to NAR’s 2025 Profile of Home Buyers and Sellers, first-time buyer share dropped to a historic low of 21%, with the median first-time buyer age now at 40, a stat that reflects just how much financial headwinds are delaying homeownership. But delaying isn’t the same as giving up, and that distinction matters.

Here are some practical angles to share with clients who feel stuck:

Explore the new Repayment Assistance Plan (RAP)

Federal repayment programs are shifting significantly this year. Starting July 1, 2026, the new Repayment Assistance Plan (RAP) became the primary income-driven option for new federal loan borrowers. Monthly payments are calculated as a percentage of income (as low as $10/month for lower earners), and the government covers any interest not covered by payments. While RAP comes with a 30-year forgiveness timeline, longer than older income-driven repayment (IDR) plans, it can significantly reduce the monthly payment load that’s eating into your client’s ability to save.

Agent tip: If a client is currently on the SAVE plan or another income-driven plan that’s being phased out, encourage them to connect with their loan servicer now about transitioning to RAP or another eligible plan.

Consider refinancing private loans

For clients with private student loans, refinancing may offer a lower interest rate or a longer repayment term, both of which can reduce monthly payments. One important caveat to pass along: refinancing federal loans into private ones means losing access to federal protections like forgiveness programs and income-driven repayment options, so it’s a tradeoff worth discussing with a financial advisor.

Look into gift funds

Many buyers don’t realize that money gifted by a family member can be used toward a down payment on many loan programs, when it’s properly documented. This option can meaningfully accelerate a buyer’s timeline, especially for clients who are financially stable but just not liquid enough to get over the down payment hurdle on their own.

Research down payment assistance programs

State and local DPA programs can offer grants or forgivable loans to qualified first-time buyers, sometimes covering a significant portion of upfront costs. Encouraging clients to explore these early in the process can open doors they didn’t know existed, and make you the agent who helped them find a way in.

“Can I build a good credit score while I still have student loan debt?”

Yes, and the sooner you can help your clients understand this, the better. When managed responsibly, student loans can help a credit profile. They’re installment loans and may contribute to a more diverse credit mix, a positive factor in most scoring models.

Here’s a quick breakdown of the habits that matter most right now, when repayment activity is ramping back up:

• Pay on time, every time. Payment history is the biggest factor in a credit score. Even one missed payment can cause a noticeable drop.
• Keep older accounts open. Closing long-standing accounts shortens credit history, which can ding a score.
• Stay under 30% credit utilization. Lower utilization signals responsible borrowing behavior to lenders.
• Diversify credit types. A mix of installment loans (like student loans) and revolving credit (like credit cards) demonstrates the ability to manage different forms of debt. 
• Monitor credit reports. With repayment programs changing, errors and surprise delinquencies can happen. Encourage clients to check their reports regularly and address issues fast.

Agent tip: Share our First-Time Homebuyer Guide early in the relationship. It covers credit basics and helps set realistic expectations before the mortgage conversation even begins. When they’re ready to talk financing, the team at HomeAmerican Mortgage Corporation (see licensing info) is a great first call.

“Will a lender approve me if I have student debt?”

Yes, lenders work with student loan borrowers every day. What matters most is how those payments fit into the borrower’s total financial picture, specifically their debt-to-income ratio (DTI). DTI is the percentage of gross monthly income going toward debt obligations. Most conventional loans allow DTIs up to around 50%, with some flexibility depending on loan type and borrower profile.

Where it gets more nuanced: different loan programs calculate student loan payments differently for DTI purposes, and those details can make or break an approval. Here’s a quick primer.

• Conventional loans (Fannie Mae/Freddie Mac): If a payment appears on the credit report, lenders use that number. For borrowers on income-driven plans showing a $0 payment, Fannie Mae may allow a $0 calculation, a real advantage for qualifying. Freddie Mac may apply 0.5% of the loan balance if no payment is listed. These seemingly small differences can significantly shift a DTI calculation.
• FHA loans: FHA uses the actual reported payment. If no payment is listed (such as during deferment), lenders typically apply 0.5% of the outstanding balance. FHA loans can be a strong path for buyers with moderate credit and lower down payments, but the imputed payment may push DTI up.
• VA loans: VA guidelines generally use the greater of the reported payment or 5% of the balance divided by 12. Deferred loans may be excluded entirely, making VA particularly favorable for eligible veterans carrying student debt. Be sure to share our Military Homebuyer Guide with any client connected to the armed forces.
• USDA loans: Similar to FHA, USDA loans use the reported payment or 0.5% of the balance if no payment is documented. For rural-area buyers, USDA can be a compelling option, provided the calculated payment doesn’t push DTI past program limits.

Agent tip: If a client has 10 months or fewer remaining on their repayment, some conventional programs will exclude those payments from DTI calculations entirely, a detail that could make the difference between qualifying and not. This is exactly the kind of thing the mortgage team at HomeAmerican Mortgage Corporation can dig into with your client. Don’t let buyers self-disqualify before they’ve had that conversation.

What about deferred loans?

A common misconception: if loans are deferred, lenders ignore them. This is not the case. Even without active payments, most lenders will assign an estimated obligation for DTI purposes.

Here’s the practical takeaway for your clients: being on an income-driven plan, even one with a $0 payment, can be more advantageous than being in deferment. It creates clear documentation and may produce a lower DTI calculation than the imputed estimate lenders apply to deferred balances.

The bigger picture

Buying a home with student loans may take more planning, but it’s far from a dead end. Today’s buyers are navigating this thoughtfully, adjusting timelines, exploring programs, and making strategic decisions about repayment. They’re not walking away from the dream. 

As an agent, your role is to help clients see the full picture before they count themselves out. Every buyer’s situation is different, and what works for one may not work for another. But the earlier you start the conversation, and the sooner you connect them with a knowledgeable mortgage professional, the more options you’re likely to uncover. Be sure to share our limited-time special offers with clients who are ready to move forward. They may be able to afford more than they think!