HUD Secretary Marcia Fudge Links Student Loan Debt to Decline in Black Homeownership

U.S. Department of Housing and Urban Development (HUD) Secretary Marcia Fudge used a high-profile June 2021 Axios interview to explicitly tie student loan debt to the persistent decline in Black homeownership rates, framing the crisis as both a credit-access problem and a generational wealth issue.

"Who has student debt? Poor people, Black people, brown people. We're the people who carry most debt," Fudge told Axios's Mike Allen. "And so the system's already skewed toward us not being creditworthy." She argued that mortgage underwriting rules quietly pushed minority borrowers out of the market before they ever reached a closing table, with student loan balances distorting debt-to-income ratios even for households with stable employment and adequate income.

Fudge illustrated the problem with a concrete scenario: a borrower earning about $50,000 a year trying to buy a roughly $200,000 home while carrying $75,000 in student loan debt would typically be turned away under legacy FHA calculations. "We're going to make that same person qualify," she said, tying her remarks to a Federal Housing Administration policy change announced by HUD on June 18, 2021.

That FHA update (Mortgagee Letter 2021-13) eliminated the long-standing rule that lenders impute a monthly student loan payment equal to 1% of the outstanding balance when the loan was in deferment or had income-driven payments. Under the new guidance, lenders use the actual documented monthly payment, and when that payment is $0 or unavailable, they use 0.5% of the outstanding balance. HUD said the change was intended to "remove barriers and provide more access to affordable single family FHA-insured mortgage financing for creditworthy individuals with student loan debt, which has a disproportionate impact on people of color." Lenders could adopt the change immediately, and it became mandatory for FHA case numbers assigned on or after August 16, 2021.

Fudge repeatedly returned to the stakes behind the technical fix. "For people of color, especially Black people, homeownership is wealth," she said. "It is not only wealth to us, but it is generational wealth." She also pointed to weak enforcement of the 1968 Fair Housing Act as a root cause of the racial homeownership gap, arguing that HUD needed to pair underwriting reforms with stronger anti-discrimination work to meaningfully move the needle.

The policy context Fudge cited is stark. FHA estimated at the time that more than 45% of first-time homebuyers also carried student loan debt. Civil rights organizations have documented that Black college graduates typically owe about 50% more in student loans than their white peers at graduation, and roughly 100% more four years out, even as Black homeownership rates have lagged white homeownership rates by roughly 30 percentage points. For first-time buyers squeezed by those debt loads, the FHA's revised calculation can meaningfully expand the price range they qualify for, particularly in markets where FHA-insured loans are the dominant low-down-payment product.