For a Fannie Mae loan, a $64,000 student loan is in deferment and shows a $0 credit-report payment. It is not a documented income-driven repayment plan with an actual $0 required payment. Which qualifying-payment approach is permitted?
Correct Answer
C) Use 1% of the balance, or a fully amortizing payment based on documented repayment terms
C. Use the permitted percentage calculation or documented amortizing payment. $64,000 × 1% = $640 monthly for the percentage method. The alternative requires repayment terms supporting a fully amortizing payment; the balance alone cannot establish that amount. Scope and exceptions: A verified actual zero payment under an income-driven plan is a separate provision excluded by these facts. The 1% method remains permitted even if lower than the actual amortizing payment. This is qualification treatment, not the borrower's billing amount or a universal mortgage-program rule. Source: Student Loans — https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
C. Use the permitted percentage calculation or documented amortizing payment. $64,000 × 1% = $640 monthly for the percentage method. The alternative requires repayment terms supporting a fully amortizing payment; the balance alone cannot establish that amount. Scope and exceptions: A verified actual zero payment under an income-driven plan is a separate provision excluded by these facts. The 1% method remains permitted even if lower than the actual amortizing payment. This is qualification treatment, not the borrower's billing amount or a universal mortgage-program rule.
Why the Other Options Are Wrong
Option A: Count the entire $64,000 balance as one monthly debt payment
It confuses outstanding principal with a monthly obligation.
Option B: Use $0 if deferment lasts more than 12 months, regardless of program
A long deferment does not create a program-independent exclusion.
Option D: Automatically use $0 whenever the loan is deferred
A reported zero during deferment is not sufficient to omit the debt.
Exam Tip
Distinguish deferred payment from a documented zero-payment repayment plan.
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