Renting an Apartment With Student Loan Debt Problems
You want to rent an apartment, but you’ve got oodles of student loan debt.
Maybe you’ve been late on some payments. Maybe you’re even in default.
Can you still rent an apartment with student loan debt headaches?
Probably. But it might not be easy. Here’s the scoop:
What landlords want
Landlords have two basic priorities:
- Find tenants who aren’t going to cause damage to the property or expose the landlord to liability. We assume you’ve got that covered.
- Find tenants who will reliably pay the rent, every month, as agreed, on time, throughout the lease term.
Landlords hate to evict. It’s a long, expensive process that can cost thousands of dollars, and it can take months to get a tenant out of a property. All landlords would rather have a property go vacant a little longer to rent to a good tenant who can and will pay the agreed rent than take a chance on a renter they may have to evict.
So that’s what you’re dealing with: Smart landlords tend to be risk-averse when it comes to tenant selection.
Small, independent real estate investment property owners have a lot of flexibility. They can rent to whoever they want. If you can show to their satisfaction that you meet these two criteria, you’re in like Flynn.
If you’re dealing with a professional property manager or management company, however, you’re probably going to have to clear a higher hurdle:
Property managers will have specific criteria that you have to meet in order to be approved to rent an apartment. Unless the management company also owns the apartment building, they won’t have much flexibility. Their rental criteria are probably in their contract with the landlord. If they violate it and rent to you, and you don’t meet the landlord’s criteria that they specified to the management company, the management company could be in hot water with the landlord.
Common apartment rental criteria
Every landlord is different. But here are are some common rental criteria you may encounter in today’s market:
- No previous evictions.
- No previous eviction filings (or none within the last X number of years).
- Verifiable income of two to four times the monthly rent. The more exclusive and in demand properties will require higher multiples.
- No felony convictions (or none within the last X number of years).
- No drug convictions within X years
- Minimum credit score – which could be a FICO Score, or it could be an industry-specific score from a report they buy from another vendor that’s optimized specifically for the real estate industry
- No serious delinquencies on your credit report.
- Not more than 1 or 2 late rent payments in last X years
- No utility shutoffs in last X years
- No more than 2 people per bedroom
- Income verification – typically via pay stubs, W-2s, tax returns or the last X consecutive bank statements.
- Employment verification. If you’re an employee, landlords commonly call your employer to verify your employment status and income.
- Security deposit. Some states limit how much a landlord can hold as a security deposit. The lower your credit score or income multiple, the more you may need to come up with as a security deposit. However, you should get this deposit back at the end of your residency, minus any damages.
Note: When an applicant is borderline, some landlords and property managers focus on your track record with prior landlords and utility companies. If you’re routinely late on your gas and electric bill, you’re probably not a great risk for the landlord.
Student Loans and Renting an Apartment
Your monthly student loan payments, as well as your balance, are going to show up on your credit report. So will your minimum payments and balances on your other debts, if the creditor reports to the credit bureaus.
If you have been paying on time, you won’t have to worry about your student loan hurting your credit score, as long as you didn’t refinance it to a credit card. In fact, it’s probably helping your score, if you’re making on-time payments. Data from CoreLogic indicates that, on average, people with student loan debt have higher credit scores than people who don’t have student debt.
But if you are commonly late on your student loan payment, or any other debt payment, it’s going to hurt your score. Your track record of making on-time payments as agreed is the most important factor in your credit record, accounting for a 35 percent weighting in your credit score.
Renting an apartment when you’re in default on a student loan
Renting when you’re currently in default status on a student loan could be tough. Having problems in the past and bringing your account current is one thing. But if you have a student loan currently in default on your credit report, that’s a much tougher thing for an apartment manager or landlord to overlook. It means your financial problems are not yet behind you, and you’ve been seriously delinquent on at least one very important account.
Are you currently in default on a student loan? There’s a way out, as long as it’s your first time in default on that loan. Read this piece on how to rehabilitate your student loan and get it out of default.
Evictions are big trouble.
Do everything you can within the law to avoid having an eviction filed against you. The filing will show up on your background check Fall behind on any other bill you like, and you can probably recover and still be able to rent an apartment in a great area. But many landlords simply will not consider renting to anyone who has an eviction on their credit record, period.
That’s going to make it tougher to find a place to live for up to seven years, until the eviction scrolls off your credit report.
So if you have to choose between paying a student loan debt and paying the rent, pay the rent. Call your servicer and request a deferment or forbearance. Or if you don’t qualify, take the ding to your credit, reduce your expenses to the bare bones, and catch up when you can.
What to do if you already have an eviction on your record
If you do have a prior eviction on your credit report, all is not lost. Some landlords will be willing to remove the eviction from your credit report, in return for the prompt payment of all amounts owed. That’s going to include past-due rent, late fees, court costs and filing fees, as well as up to two month’s rent in “liquidated damages,” depending on the jurisdiction and the lease terms.
Securing a good recommendation, even if you’ve been evicted
If that’s not possible, be out within a few days so the landlord can re-rent the property to someone who can afford it. Be sure to leave the place in pristine condition. Landlords talk to each other. The owner or manager of the place you’re applying to may well call your old landlord as a reference. If your new place is much less expensive than your old one, you left the old apartment in great shape, and you’re faithfully making payments to knock out anything you owe to the old landlord who evicted you, you may still get a decent reference. “He’s a nice kid, and he left the apartment in pristine condition, but he just couldn’t afford the rent anymore” is much better than “Yes, the tenant was evicted for non-payment. No further comment.”
Jason Van Steenwyk is an experienced financial industry reporter and writer. He is a former staff reporter for Mutual Funds, and has been published in SeekingAlpha, Nasdaq.com, NerdWallet, Value Penguin, RealEstate.com, WealthManagement.com, Senior Market Advisor, Life and Health Pro and many other outlets over the past two decades. He is also an avid fiddle player and guitarist. He lives in Orlando, Florida.