Income-driven repayment plans limit your monthly student loan payments between 10 to 20 percent of your disposable monthly income with the specific amount, depending on the plan and family size. But because your income and family situation can change from year to year, you must prove both annually.
Recertification is easy, but the consequences can be serious if you don’t. Fortunately, it only takes a few minutes to submit your forms and provide the required documentation.
When should you recertify your student loan?
If you have opted for an means-tested repayment plan, you must recertify your income and family size once a year, even if there are no changes. Recertification takes place around the time you first started your income-driven plan and you must submit your recertification request within 10 days of this time.
Your loan manager should send you a reminder message when it’s time, so pay attention to it in the email. Once you receive this notification, it’s a good idea to fill out your paperwork, even if you don’t have to.
How do you apply for income-related repayment?
Recertification is only necessary if you are already on a income-driven plan. If you’re not already paying student loans based on your income, you can apply for one of four plans, including:
- Revised Pay As You Earn (REPAYE)
- Pay as you earn (PAYE)
- means-tested reimbursement (IBR)
- means-tested reimbursement (ICR)
You can apply online through the Federal Student Aid website but you need an FSA ID. The whole process takes about 10 minutes and you only need to submit one application to be eligible for all income-driven options.
During the application process, you must provide personal information, including your name, address, date of birth, and social security number. You can choose to have your income documented electronically via a link with the tax authorities. If you don’t want to use past tax records because your income has changed, you will receive instructions on how to submit documentation to your loan administrator.
How to submit your recertification
After you sign up for your income-driven payment plan, you can return to the Federal Student Aid website each year to recertify your income and family size. Instead of selecting the option to enroll, choose ‘Submit annual recertification of my income’.
Again, you need to log in with your FSA ID and can complete the entire process online. You will be asked a few simple questions about your family size and income and about your marital status. And you can choose to have the IRS provide your income information or submit documentation directly to your loan administrator.
If you prefer to submit a paper recertification, you can: download the application and return it to your loan administrator along with the required documentation.
Documents you need to recertify your means-tested repayment plan
If you do not want the IRS to pull your income information, you must provide other proof of income, such as a letter from your employer or recent pay stubs. At least one form of income documentation is always required.
What happens if you don’t recertify?
If you don’t recertify your income-driven plan by the annual deadline, any interest not paid on your loan will be capitalized. This means it will be added to the principal balance of your loan. For example, if you owed $10,000 and had $500 in unpaid interest, you would owe $10,500 after capitalization. You would have to pay interest on a larger loan balance in the future, making the repayment more expensive.
If you make payments with the REPAYE plan, you will also be removed from this plan if you do not recertify. You will be given a new plan with monthly payments determined by either the amount required to repay your loan within 10 years from the date your new payment plan begins or to be repaid at the end of the REPAYE repayment period. plan.
If you have one of the other income-driven plans, you’ll be left with it if you don’t recertify, but your payment would add up to the amount owed under the standard repayment plan, which is designed to be repaid over 10 years. Instead of payments based on income, they are calculated so that you can repay the amount owed on your loan when you first entered means-tested amortization.
If your plan changes or payments increase, you can switch back to an income-driven plan by providing the appropriate information to your loan manager.
Make sure to recertify your plan in time
Income-driven payment plans make federal student loan repayments affordable so you don’t risk missing payments and defaulting on federal student loans. Always make sure to recertify your loans every year. You also want to make sure you have chosen the right income-driven plan and if you are struggling to pay, consider Direct loan consolidation which allows you to choose payment plans with a longer repayment timeline and lower monthly payments.