If you have federal student loans and have opted for an income-driven repayment plan, you must submit information about your income and family size every year. This is regardless of whether or not anything has changed. This is known as recertification. Recertification is mandatory for anyone using an income-driven repayment plan and it can raise or reduce your payments for the following year.
Why Do I Need to Recertify My Income-Driven Repayment Plan?
When you opt for an income-driven repayment (IDR) plan, your monthly student loan repayments are pegged to your monthly income and family size. The goal is to ensure that the loan repayments are always affordable.
There are four income-driven repayment plans:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Pay As You Earn Repayment Plan (PAYE Plan)
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
Although each of these plans varies slightly in the way the repayments are calculated, all plans use your monthly income and family size as the base for the calculations. However, a borrower’s monthly income may increase or decrease or their family size may change from one year to the next. When this happens, the monthly repayments have to be re-calculated so they are more appropriate to the borrower’s current circumstances. Recertification is the process of informing the lender about the change in circumstances.
Recertification has to be done at least once a year, every year even if there have been no changes in your monthly income or family size. It involves filling another income-driven repayment plan application with your most recent information. You’ll also need to submit documentation about your current income and family size to support the application.
When Do You Need to Recertify Your Income Driven Repayment Plan?
When you apply for an income-driven repayment plan, you’ll get a notification from your federal student loan servicer with details of the specific plan you’ve enrolled in. The notification will include details of your monthly repayment amounts, payment deadlines and terms of the plan.
Every year you’ll also receive a notice from your loan servicer reminding you that it’s time to recertify. That notice will include a deadline for recertifying. It’s important to make a note of the reminder and submit your recertification application and documents before that deadline. Missing the deadline could revoke several benefits that you enjoy with your IDR plan.
To make sure you don’t miss this crucial deadline, consider adding a reminder to your calendar or phone so you receive some sort of notification. And make sure to pay as soon as you get the reminder notification.
A better option is to submit your recertification application early. There’s no downside to paying early. In fact it works to your advantage as it eliminates the risk of forgetting the deadline. Moreover, the updated payments don’t go into effect until the next annual repayment period is scheduled to start.
How To Recertify Your Income-Driven Repayment Plan
You can either submit your recertification application online or by traditional mail.
Regardless of which option you choose, recertifying as soon as you get notice from your loan servicer is a smart strategy. You’ll get it out of the way, lower the risks of forgetting, and continue getting the benefits.
Along with your recertification application, you’ll need to provide information about your
- current family size
- your most recent federal tax return
- tax transcript
- or pay stubs as alternate proof of taxable income if you didn’t file taxes.
If you don’t have any supporting documentation, you will have to submit a signed statement explaining your income.
How to recertify online
Recertifying your IDR plan online through the Studentaid.gov website is faster as easier as you can use the IRS Data Retrieval Tool to access your tax records directly. To recertify online:
- Go to gov and scroll down to the “˜Returning IDR Applicants’ section.
- Select the “˜Submit annual re-certification of my income’ section and log in to get started. Your log in details are your FSA ID and password.
- In the appropriate sections enter details pertaining to your family size, marital status and type of employer. If you’re married, you’ll need to enter your spouse’s name.
- Complete the income verification section. This can be done directly by connecting to your IRS tax return. You’ll need to submit a pay stub or letter from your employer if your income information has changed since your last tax year.
- Enter your current contact details including your phone number, email address, and postal address.
- Review your application to make sure that all information is correct. Then sign and submit your completed recertification application.
Filling in and submitting the online recertification application takes less than 15 minutes must be completed in one session.
How to recertify by traditional mail
You can also send your recertification application by mail, though you should know that it is more time-consuming as you won’t have access to the tax retrieval tool. It also takes longer to process because of the time it takes for the mail to reach your loan servicer. In addition you’ll have to make a trip to the post office to mail the application.
To recertify your IDR by mail:
- Download and print the latest IDR plan request form from here.
- Fill in all the information asked for in the request form. This will be the same as the information asked for in the online application form.
- Attach the income verification documents listed on the form.
- Review your application to make sure all information is correct.
- Seal and send your form and supporting documents to the mailing address provided by your loan servicer.
What Happens If You Miss The Recertification Deadline
If you forget and miss the recertification deadline, different penalties apply depending on the income driven plan you use.
You may end up overpaying or underpaying if you’ve set up automatic payments.
Both scenarios are undesirable. If your income has dropped or your family size has increased, recertifying will lower your monthly payments. Without completing your recertification, your bank will continue making higher monthly payment amounts, leaving you short of funds. On the other hand, if your income has increased or your family size has decreased, recertifying will increase your monthly payments. If you don’t complete the recertification, your bank will continue with the lower monthly payments. This will eventually result in late fees and interest on the outstanding amount in addition to damaging your credit report and credit score.
Your payments will no longer be based on your income.
If you miss a deadline, you’ll automatically get transferred back to the standard, 10-year repayment plan and revert back to that plan’s repayment terms. That means you’ll go back to fixed monthly payments based on how much you owed when you first enrolled in your income-driven repayment plan. This could increase your monthly payments considerably, making them unaffordable. In this case, the only other way to lower your monthly payments to make them more affordable is by refinancing your loans. It’s important to understand the downsides of refinancing federal student loans before choosing this option.
The third downside of missing the deadline is that the forgiveness clock will reset. When you don’t recertify within the deadline, you lose all the months of payment that would have counted towards IDR forgiveness. You are allowed to re-enroll. But it means you’ll have to start all over again as the previous payments still won’t be considered.
