For many student loan borrowers, income-driven repayment plans like IBR and PAYE can be lifesavers. These programs lower monthly payments from the potentially overwhelming amounts required under the Standard Repayment Plan to something more manageable (as low as $0 in some cases).
Unfortunately, however, these plans aren’t one-and-done solutions. Instead, you have to “recertify” your plan each year. The recertification process confirms continued eligibility and adjusts your monthly payment amount according to any changes in your income or family size.
You are required to recertify income-based repayment plans even if your income and family size are staying the same. Otherwise, your payments will no longer be based on your income and will jump to the Standard Repayment amount (or more, if you’re on ICR or REPAYE).
So even if nothing’s changed, it’s important that you participate in this process.
How to recertify Income-Based Repayment and similar plans
The recertification process consists of submitting a new application for income-driven repayment (yes, the same application you filled out originally). However, under the section that asks the reason for your application, indicate that you’re submitting documentation so that your payment amount can be recalculated.
That IBR proof of income will typically consist of your federal income tax return. If you haven’t filed a return in two or more years, or your return doesn’t reflect your current circumstances, then a pay stub or a confirmation that you don’t have any income will usually suffice.
If you are on IDR plans with multiple servicers, you have to recertify with each servicer.
You must recertify each year by the deadline, but you should also recertify any time your income or family size changes. So there might be years when you have to submit for recertification more than once.
What happens if you don’t recertify?
As stated above, your payments under whatever IDR plan you’re on will no longer be based on your current income and almost certainly increase to the Standard Repayment amount.
However, there’s more to it than that. Here are the other ways failing to recertify can impact you:
- If you have auto-pay enabled, having your monthly payment jump unexpectedly could lead to an overdraft (and you could be charged any associated overdraft fees). Even if you don’t overdraft, I’m imagining you had other uses for that money. Having it withdrawn with no warning could be inconvenient, to put it mildly.
- Outstanding subsidized interest may be capitalized (added to your principal balance). If your monthly payments were less than accruing interest, this could cost you thousands of dollars over the lifetime of your loan. Even if your recertification subsequently goes through, it may be too late – the interest capitalization may be permanent.
- While you may be able to obtain a hardship forbearance while you get your recertification straightened out (bringing payments down to a manageable level again), interest may accrue during that time that wouldn’t otherwise.
- If you’re hoping for loan forgiveness (whether public service loan forgiveness or forgiveness under one of the other income-driven plans), then the payments you make or months you spend on forbearance while you get the situation squared away may not count. This could delay your payoff date and cost you money in the meantime.
What can delay the recertification process?
According to the Department of Education, over half (57 percent) of borrowers surveyed failed to recertify for the income-based repayment plan they were on. Why does this happen?
Your lender should send you a reminder to recertify. However, if the reminder is lost, or you procrastinate, you may miss the window.
And even if you do submit everything on time, that’s no guarantee that everything will be processed in a timely manner. According to the Consumer Financial Protection Bureau (CFPB), there have been cases of borrowers whose recertifications fell through even though they adhered to their servicers’ deadlines.
Since it’s a process dependent on tax returns and everyone has the same deadline, it’s possible servicers get overwhelmed and papers get lost in the shuffle.
How to facilitate your recertification each year
While the process is simple enough, many people find ongoing paperwork onerous. However, it’s crazy to go through all the hoops of getting on an income-driven repayment plan, only to let your certification lapse even though you still qualify.
While you can’t control your servicer, you can control yourself.
It’s vital that you set your own calendar reminders, obtain all required IBR proof of income documentation ASAP each year, and follow these guidelines if you have a problem with your student loan servicer.
Don’t let all your hard work and time spent on one of these plans get undone by a simple deadline. Be proactive and take matters into your own hands. Good luck!
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