Mortgage Help for Debt-Saddled Grads
New rules make it easier to qualify for a home loan or to use a refi to pay off college debt.


Today’s college grads leave school with an average of $34,000 in student-loan debt. That mound of debt is delaying homeownership among millennials. Parents and grandparents who cosigned private student loans or took out Parent PLUS loans may also be burdened. Now, mortgage giant Fannie Mae has launched loan-underwriting changes that will lighten the load.
When calculating a borrower’s monthly debt-to-income ratio, lenders will exclude payments made in the past year by someone else—typically a parent or employer—for nonmortgage debt, including student loans. And for those on an income-adjusted repayment plan, lenders will use the lower payment on a federally insured loan instead of the higher, fully amortized payment of principal and interest.
A third initiative allows homeowners to refinance their mortgage, taking cash out to disburse directly to a student-loan lender to pay off debt. That will also help parents or grandparents who borrowed to help the kids and now want to refinance. The new Student Loan Cash-Out Refinance loan can’t exceed 80% of the current market value of the home. For example, refinancing a $175,000 mortgage, lowering the rate from 4% to 3.75% and rolling in $25,000 in student loans would save borrowers about $80 a month.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Refinancers will lose some student-loan protections, including income-based repayment and deferment on federal loans. You’ll lose any student-loan interest deductions for which you may have been eligible, but you’ll gain a larger mortgage-interest deduction if you itemize on your tax return.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
How to Turn Your Retirement Dreams into Reality (Despite Your Fears)
Stressing over shrinking savings, rising healthcare costs, or losing your purpose can give you chills, but smart money moves can lead to financial freedom and a happy retirement.
-
Figma IPO: Should You Buy FIG Stock?
The Figma IPO has plenty of buzz building around it, with the design software company expected to start trading next week.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online Bargains
Feature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2025
Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?
insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Is Amazon Prime Day? Everything We Know, Plus the Best Deals on Apple, Samsung and More
Amazon Prime Amazon Prime Day is four days this year. Here are the key details you need to know, plus some of our favorite deals to shop during the sale.
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.