Reducing Debt To Income Ratio Through Reducing Monthly Student Loan Debt

This Article Of Reducing Monthly Student Loan Debt Was Written By Bob Vogel NMLS 1446953

If you are looking to buy a home but are concerned that your debt to income ratio will be too high because of your student loan payments, this article discusses options to reduce your monthly student loan payments.

  • Reducing your monthly student loan payment can significantly reduce your monthly debt to income ratio.
  • If you apply for student loan repayment using one of these options, you can reduce your debt to income ratio in less than 30 days in most cases.
  • Many people do not even know these programs exist. Lets say for example, that you are repaying your student loans using the standard repayment plan, which is 10 years, and your monthly student loan payment is $700, this could make or break an approval to purchase a new home.
  • Imagine getting that payment cut in half or even more, possibly down to zero.

Cost Of An Education

The cost of an education has increased dramatically over the last two decades and many graduates are looking for ways of reducing monthly student loan debt.

  • The U.S Department of Education reports that the average annual tuition is currently $16,482 for a four year public school and $34,193 for a private school.
  • This is up from $8,653 for a four year public school and $21,373 for a private school in 2000.
  • Currently, there is approximately $1.3 trillion in outstanding student loan debt in the United States.
  • With the increasing cost of tuition, many young students are forced to take out student loans to help with the rising costs of tuition.

Repayment Alternatives

Once you graduate from school, you generally have six months before your forbearance ends and you are required to begin making your payments. There are many payment alternatives when it comes to paying back your student loans.

  • 10 year standard repayment plan- This is ideal because you pay the loan off sooner with the least amount of interest, although your monthly payments are higher
  • Graduated Repayment Plan- Payments start low, while you are new in your career and your income is expected to increase as you gain more experience in your field. While the payments start low, they get excessively high towards the end
  • Extended Repayment Plan- Allows you to pay for a period of up to 25 years, although these are only for loans that are at least $30,000

Income Based Repayment Plans

Income based repayment plans offer individuals an option to pay off their student loan debt based on their adjusted gross income and is a great option for reducing monthly student loan debt.

  • Under these plans, the individual must re-certify each year by providing a copy of their annual federal income tax return.
  • The monthly payment can be as low as $0 every month and the debt can be forgiven after 25 years, although this may be a taxable event (forgiven debt can be counted as income).

Public Student Loan Debt Forgiveness

An individual that works for a government organization, not-for-profit, or serving in AmeriCorps or Peace Corps, may qualify after 120 payments and 10 years of work history in public service.

  • The individual must be making payments through an income-based repayment plan to benefit.
  • Under an income-based repayment plan, a student can virtually pay nothing towards their student loans; after the 120 months, the debt will be forgiven and in this situation would NOT be a taxable event.

Choosing The Best Scenario

When applying for student loan repayment programs, one needs to consider their personal financial situation.

  • Currently, a married borrower can file married filing separately and exclude the spouse’s income from the household income calculation.
  • This may benefit those borrowers who earn less income than their spouses and their spouses do not have student loan debt.
  • You would need to be sure that a married filing separate filing status would financially benefit you as you would lose credit for child tax credits, child care costs, education credits, and possibly other deductions.

About The Author Of Reducing Monthly Student Loan Debt: Bob Vogel NMLS 1446953

This article on Reducing Monthly Student Loan Debt was written by Bob Vogel NMLS 1446953 of The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029

  • Bob Vogel is a senior writer for Gustan Cho Associates and moderator for Lending Network USA .
  • Bob is a loan officer with The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029.
  • Armed with a Master of Business Administration degree and a Master’s degree in accountancy, Bob is an expert in all areas of accounting and audits.
  • Bob is an expert on FHA Loans, VA Loans, USDA Loans, and Conventional Loans.
  • Arlene is known nationally and due to being editor in chief for California Loan is well known in the Sacramento Real Estate community as the go to lender for tougher and creative deals.
  • Bob Vogel represents CrossCountry Mortgage NMLS 3029, a national full eagle mortgage banking company that is licensed in 50 states with a national known reputation for no lender overlays and working with borrowers to make the deal happen.
  • A mortgage loan denial does not exist in Bob Vogel’s vocabulary.
  • All of Bob Vogels pre-approvals will not get closed but closes on time.
  • Bob Vogel of CrossCountry Mortgage fully understands that the pre-approval stage is the most important phase of the mortgage process and the main reason for last minute mortgage denials is due to the loan officer not being diligent when issuing a pre-approval to the borrower.
  • Due to Bob’s expertise in accounting and financial audits, Bob is The Gustan Cho Team at CrossCountry Mortgage chief income calculations expert for our licensed mortgage loan officers.
  • Calculating income is extremely complex for self employed borrowers who have multiple corporate tax returns.
  • Bob is a team player and a natural born leader where our whole team and staff look up to him for his expertise and guidance and leadership.
The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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