Student loan borrowers required to annually update their financial information for income-driven repayment plans may find that process a lot easier in the future.
The U.S. Departments of Treasury and Education have signed a Memorandum of Understanding that establishes a framework for sharing tax data over multiple years for federal student loan borrowers with income-driven repayment plans.
Instead of reporting their income to the Department of Education’s Office of Federal Student Aid, borrowers will grant their consent to the Internal Revenue Service (IRS) to share their financial information. Then, payments can be adjusted accordingly.
Avoiding jumps in monthly income-driven repayment
Turning in a regular income report can be cumbersome and difficult to remember each year for some student loan borrowers. And failure to do so can result in huge jumps in monthly payments, primarily because the Department of Education may assume you can make higher payments.
When this happens, student loan borrowers may suffer financially as their income-driven repayments revert to higher standard amounts. It can also be time-consuming and inconvenient to correct the situation.
With this multi-year information-sharing system, borrowers can give the IRS permission to share their financial information with the Department of Education for up to five years. That way, they no longer have to go through the paperwork each year.
By streamlining the process, the hope is that student loan borrowers will feel less stress and fewer changes will need to be made after the fact each year.
However, this is just a Memorandum of Understanding, so nothing has happened yet. But it does set the stage for a new process that could make things easier for students going forward.
For more information on how to apply for an income-driven repayment plan, check out our step-by-step guide here.
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