U.S. Rep. Gregory Meeks (D-NY) applauded a recent change to how the Federal Housing Administration (FHA) calculates the student loan debt of potential homebuyers pursuing FHA’s single-family insurance program.
With the change, the FHA will consider potential homeowners’ student debt obligations based on what they actually pay monthly, which will assist the approximately 50 percent of federal student loan borrowers in income-driven repayment plans with securing an FHA loan. The new guidelines modify FHA’s past practice of calculating potential homeowners’ student loan obligations as equal to one percent of their outstanding balance, which disqualified many potential homeowners with student debt from participating in FHA’s insurance program.
“I thank (HUD) Secretary (Marcia) Fudge for taking this bold move to assist first-time homeowners – who happen to have student debt – to better access FHA’s insurance program, which is intended to assist low-wealth individuals with securing a home. One sure way of building back better is to promote homeownership, especially among underserved communities as homeownership remains one of the most reliable avenues toward wealth building,” Meeks, senior member of the House Financial Services Committee, said.
Last week, Meeks introduced legislation with Rep. Nikema Williams (D-GA) — the Making FHA Work for Borrowers with Student Debt Act (HR 3861) – that would codify the FHA’s recent change.
“Student loan burden – and high down-payment requirements – have been significant barriers to homeownership for many young people, especially young people of color. Not only is the FHA’s policy change the right thing to do, but it is also consistent with President Biden’s stated commitment to racial equity and ensuring our federal policies support often underserved communities. The past rule was indeed overly restrictive and amounted to a student debt penalty that unfairly closed the door to wealth building for many home-ready Americans,” Meeks added.