• The Federal Housing Administration 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 will particularly help Black borrowers.

If you have student debt, you may struggle to also afford a mortgage. That's a potentially big 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 within HUD - announced updates to calculations related to monthly student-loan payments. Essentially, they're designed to prevent borrowers' debts from being overstated, which should both make borrowers more creditworthy and boost their chances of getting a mortgage.

Under the old rules, 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 in approved deferment and borrowers under income-driven repayment plans. The new rules remove that calculation requirement and allow lenders to use borrowers' actual monthly loan payments, making it easier for a borrower to get a mortgage application approved.

For example, as Forbes reported, if a borrower has a $100,000 outstanding student loan balance but has been approved for $245 monthly payments, under the old rules, the FHA would calculate the borrower's monthly payment as $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 FHA is taking action to make it easier for borrowers with student loan debt to qualify for a federally insured mortgage. This new policy will make a big difference for individuals throughout our nation and is another step in our mandate to promote equity and opportunity for homeownership."

According to the press release, the new policy will help homebuyers with student debt meet the minimum eligibility requirements for an FHA-insured mortgage and enhances the agency's ability to serve first-time homebuyers, who make up 80% of FHA's demographics each year.

How these changes help borrowers of color

FHA estimated that more than 45% of its first-time homebuyer demographic also has student debt, with a large portion of that debt falling on borrowers of color. Fudge expressed that disproportionate impact of student debt in an interview with Axios on Sunday.

"Who has student debt? Poor people, Black people, brown people," Fudge said. "We're the people who carry most debt. And so the system's already skewed toward us not being creditworthy."

Fudge said part of the problem comes down to failures in enforcing the Fair Housing Act, which, passed in 1968, prohibits housing discrimination. Black Americans are falling significantly behind white Americans when it comes to homeownership, with Insider reporting last year that Black families pay over $60,000 more in homeownership costs than white families.

And the student debt crisis is only making the problem worse. Thirty-six civil rights organizations released civil rights principles for student debt cancellation in April that "will help Black and brown borrowers build wealth and enable our economy to move forward as millions of Americans are able to start families, buy homes, and set up 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 the disproportionate burden of student debt does not cut out Black borrowers from the ability to own a home.

"For people of color, especially Black people, homeownership is wealth," Fudge said. "It's not only wealth to us, but it's generational wealth."