• The Federal Housing Administration has announced new calculations to determine mortgage assistance.
• The new rules will make it easier for people with student debt to buy a home.
• HUD Sec. Marcia Fudge said the new calculations would help black borrowers in particular.
• See more stories on the Insider business page.

If you have student debt, you might have a hard time paying off a mortgage. This is a potentially significant problem, as 45 million Americans collectively owe $ 1.7 trillion in student debt. But the Federal Department of Housing and Urban Development (HUD) is trying to ease the burden.

Last week, the Federal Housing Administration (FHA) – an agency of HUD – ad updates to calculations related to monthly student loan payments. Essentially, they are designed to keep borrowers’ debts from being overestimated, which should both make borrowers more creditworthy and increase their chances of getting a mortgage.

Under the old rules, the FHA

mortgage lenders
would calculate a borrower’s monthly loan payment as 1% of their outstanding balance for loans that are not in repayment, including borrowers with an approved deferment and borrowers with loan-based repayment plans returned. The new rules remove this calculation requirement and allow lenders to use borrowers’ actual monthly payments, making it easier for a borrower to get approval for a mortgage application.

For example, like Forbes reported, if a borrower has an outstanding student loan balance of $ 100,000 but was approved for monthly payments of $ 245, under the old rules, the FHA would calculate the borrower’s monthly payment to be $ 1,000, which could prevent the borrower from getting a mortgage.

“Homeownership is the cornerstone of the American dream and the best way to build generational wealth,” HUD Secretary Marcia Fudge said in a statement. “I am proud that the FHA is taking action to make it easier for borrowers with student debt to qualify for a federally insured mortgage. This new policy will make a big difference to individuals across our country and is another step in our mandate to promote equity and the opportunity of homeownership. “

According to the press release, the new policy will help homebuyers with debt meet minimum eligibility requirements for an FHA-insured mortgage and improve the agency’s ability to serve first-time homebuyers, who represent 80% of the FHA demographics annually.

The FHA has estimated that over 45% of its first-time home buyers also have student debt, with much of that debt falling on borrowers of color. Fudge expressed this disproportionate impact of student debt in an interview with Axios on Sunday.

“Who has student debt? The poor, the blacks, the browns,” Fudge said. “We are the people who carry the most debt. And so the system is already skewed in that we are not creditworthy.”

Fudge said part of the problem comes down to failures in applying the Fair Housing Act, which, adopted in 1968, prohibits discrimination in housing. Black Americans are significantly behind white people when it comes to homeownership, Insider reporting last year that black families pay more than $ 60,000 more in homeownership fees than white families.

And the student debt crisis only compounds the problem. Thirty-six civil rights organizations in April released Civil Rights Principles for Student Debt Cancellation that “will help black and brown borrowers build wealth and keep our economy going. before, because millions of Americans are able to start families, buy homes and start small businesses. “

They noted that upon graduation, black borrowers typically owe 50% more than white borrowers, and after four years, black borrowers owe 100% more. Fudge wants the new FHA calculations to ensure that the disproportionate burden of student debt doesn’t prevent black borrowers from owning a home.

“For people of color, especially blacks, property is wealth,” Fudge said. “It is not only a wealth for us, but it is a generational wealth.”