How to Re-Certify a Student Loan Repayment Plan
Switching your student loan repayment plan to one of the four income- driven plans offered by the federal government can do wonders for your finances. These programs usually increase the amount of time you spend paying off your loan balance. But in return, being able to tie your monthly payment to your income level can help you improve your financial stability and save you from feeling completely overwhelmed by your loan balance.
But once you sign up for an income-based plan that works for you, you’re not really done yet. Check your calendar because you must re-confirm your income and household size every year you participate in this plan.
The deadline depends on your student loan organization, but you can expect the first reminder to arrive about three months before the deadline.
To recertify, you must log into your account at studentaid.gov and complete a short form . You will provide information about how many children there are in your family, your marital status and what your income from your previous taxes is. You will contact the IRS for federal tax information.
You can actually run a demo of the recertification process if you’ve never done it before and want to get comfortable with the system before actually doing it.
If your income has dropped significantly since you filed your last tax return, you need to document your taxable income. This information should be sent directly to your loan agent. After you complete the recertification process on the Student Aid website, you will receive a pre-completed application to send along with your documentation. The date on any income documentation you provide, be it a pay slip or a letter from your employer, must be no older than 90 days.
What happens if you miss the recertification deadline? This is why this post exists. Because it’s ugly. For every income-driven plan except REPAYE, not recertifying will put you back on a standard 10-year repayment plan. REPAYE will offer you an “alternative repayment plan” for either 10 years or whatever is left of your current REPAYE term.
On top of that, your interest will be capitalized: it will be added to the principal on the loan so that you end up paying interest on your interest . This can significantly increase the amount you pay over the life of your loan repayment plan.
But wait, that’s not all! If you signed up to auto-pay your federal student loan, a new higher amount may be charged to your account. And it can lead to overdraft if you’re not careful.
You can re-enroll if you miss the recertification deadline, but you have a gap in your payment plan that leaves you hooked on standard monthly payments, even if that means the auto payment just wiped out your checking account.