does debt to income ratio include student loans

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This is a quick introduction to does debt to income ratio include student loans.

The debt to income ratio is a financial term that describes how much of your monthly income goes towards paying off debt. It’s usually calculated by dividing the total amount of debt you owe by your household’s gross monthly income.

A lot of people wonder if their student loan payments count as part of their debt, since those payments don’t go towards anything physical like a mortgage or car payment. The answer is yes: student loan repayment does count as part of your overall debt. You can include all student loan payments when calculating your DTI ratio.

Debt-to-Income Ratio for Student Loan Refinancing

Generally, student loan refinance lenders look for borrowers with debt-to-income ratios below 50%.Ryan LaneFeb 8, 2022

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Lenders determine debt-to-income ratio, or DTI, by dividing your total monthly debt payments and other financial obligations by your gross monthly income. Generally, you’ll need a DTI below 50% to be able to refinance student loans. The lower your DTI, the better your chances of qualifying and getting a low interest rate.

» MORE: Can you qualify for student loan refinancing?

Are student loans counted in your debt-to-income ratio?

Lenders typically count your existing student loan payment in your debt-to-income ratio. They’ll also include your housing payment — even if you rent — as well as other debt payments and obligations such as child support.

Use the calculator below to estimate your debt-to-income ratio. Depending on your DTI, consider applying for student loan refinancing pre-qualification to see if you’ll meet a lender’s other eligibility criteria. Prequalifying won’t hurt your credit and will give you an estimated personalized interest rate.

Can you refinance with a high debt-to-income ratio?

If your debt-to-income ratio is high, you may be able to refinance student loans by increasing your income, paying down debt or both. If those options aren’t possible, refinancing with a co-signer may also help you meet the lender’s requirements.

A high debt-to-income ratio means a lot of your income goes toward bills. The Federal Reserve considers a DTI of 40% or more a sign of financial stress. A low debt-to-income ratio — 20% or less — means you have wiggle room in your budget.

Refinancing student loans can actually decrease your debt-to-income ratio by lowering your monthly student loan payment. This may be helpful, for example, if you want to get a mortgage to buy a home.

If you can’t qualify with a student loan refinance lender because of your DTI, consider other options like enrolling in an income-driven repayment plan. That may offer you a more affordable monthly bill.

» MORE: Best lenders to refinance student loans with low income

Hawaii is state with highest average debt-to-income ratio, study says -  Pacific Business News

Debt-to-income ratio requirements

You’ll need to meet a lender’s DTI requirements to refinance student loans. DTI criteria often isn’t shared publicly, but the following lenders provide this information:

LenderMaximum debt-to-income ratio
Splash Financial35%-50% depending on the borrower’s income, degree type and loan amount.
Education Loan Finance55%
PenFed35%-50% depending on the borrower’s income, degree type and loan amount.

Student loan refinance lenders assess your DTI to understand how much extra cash you have each month, but it’s not their only consideration. Factors like your credit history and scores, employment status and savings are also important in qualifying you for student loan refinancing,


Report Highlights. Currently, student loan debt at graduation is an estimated $31,100. Despite the rising cost of tuition, graduates who have been out of school for years often owe more than new graduates due to interest rates.

  • The average total student loan debt-to-income ratio (DTI) for a new graduate is 54.6%.
  • The average monthly student loan payment for the Class of 2021 is an estimated $391.
  • After adjusting for inflation, the Class of 2007 graduated with the highest amount of debt, with an average balance of $36,765 in May 2021 dollars.
  • Before adjusting for inflation, the average student loan debt at graduation has increased 2,807% since 1970; after adjusting for inflation, the average debt increased 317%.
  • The current average federal student loan debt balance $37,113; including private student loan debt, the average balance is as high as $40,339.

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