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An income-driven plan can make your federal student loan payments more affordable, but applying isn’t a one-time thing. Once you’re on an income-based repayment plan, you’ll need to recertify your income and family size every year in order to stay on it. The process to recertify income-based repayment takes just 10 minutes or less, but it’s important to get it done before the deadline to keep your student loan payments on track. This guide will walk you through the recertification process and how to do it.
What Are Income-Driven Repayment Plans?
The government offers income-driven repayment plans for borrowers who need lower, more affordable monthly student loan payments. There are four income-driven plans:
Income-Based Repayment (IBR)
Pay As You Earn (PAYE)
Revised Pay As You Earn (REPAYE)
Income-Contingent Repayment (ICR)
While each plan works a little differently, they all adjust your monthly payments in accordance with your discretionary income. Depending on your income, your payment could be as low as $0 per month. These plans also extend your loan terms to 20 or 25 years so you have more time to pay back what you owe. If you still have a balance at the end of the term, and you’ve been making on-time payments, it will be forgiven.
What Is Income-Driven Repayment Plan Recertification?
When you’re applying for IBR or another income-driven repayment plan as a way to help with paying off student loans, you provide information on your income and family size. That’s part of the application for IBR. After that, you’ll need to update the information on an annual basis, regardless of whether there have been any changes in your situation. Your loan servicer calculates your student loan payments based on your income and family size, so it needs your most recent details every year. You can also choose to recertify your plan early if your circumstances have changed. If you have a child or experience job loss, for instance, you can recertify your income-driven plan with the updated information to get a reduced monthly student loan payment.
How Has the Recertification Process Changed During Covid-19?
Payments have been paused since March of 2020 in response to the Covid-19 pandemic, so student loan borrowers have not had to recertify their income-driven repayment plans during this time. However, the payment pause for federal loans is over in the fall of 2023. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.If your income has gone down since the last time you recertified, you may want to recertify early to update your payment amount. After the payment pause ends, your payments will resume at the new amount.What’s more, the government is allowing borrowers with Direct Loans to self-report their income online or over the phone until six months after the payment pause ends. Normally, you would need to provide documentation, such as tax returns or pay stubs, during student loan recertification. Recommended: How Do I Find My Student Loan Lender?
Recertifying Income-Based Repayment
Recertifying your income-driven repayment plan should be quick — just 10 minutes or less. You can recertify online through the Federal Student Aid website. Here’s how to do it:
Sign Into Your Federal Student Aid Account
Get started by going to the Income-Driven Repayment Plan Request page on the Federal Student Aid (FSA) website. Scroll to the section marked “Returning IDR Borrowers” and select “Recertify Your Plan.” Once there, you can log in with your FSA ID and password.
Provide Your Family Information
The form will ask you to provide information on your family and spouse. You can indicate how many children you have and whether you’re expecting a child. You’ll also fill in your marital status and whether your spouse has federal loans. Most income-driven plans will only take your individual income into account if you file taxes separately from your spouse, though the REPAYE plan includes both incomes, regardless of whether you filed jointly or separately.
Update Your Income
Next, you’ll need to provide details of your income. You may need to verify your income with a recent tax return or pay stubs. As mentioned, borrowers with Direct Loans can self-report their income online or over the phone without any supporting documentation until six months after the payment pause ends in 2023.
Sign and Submit
The last step is to provide your electronic signature and submit the form. Your loan servicer will use your updated information to calculate your student loan payments for the year ahead. But you don’t have to wait until the deadline to recertify if your situation changes. If you need a lower monthly payment because you lost your job or your family grew, you can recertify earlier and ask for a recalculated student loan payment. Recommended: How Much Student Loan Debt is Too Much?
What Happens if You Forget to Recertify
If you forget to recertify by the deadline, you could face a number of consequences.
Payments Will Probably Increase
If you don’t recertify your income and you’re on the PAYE, IBR, or ICR plan, your student loan payments will no longer be based on your income. Instead, your payments will be recalculated to match what they would be on the standard 10-year plan. If you’re on the REPAYE plan, you’ll be switched to an alternative plan and your payment will be the amount necessary to pay your loan in full by either 10 years from the date you start on the new plan or the ending date of your 20- or 25-year term, whichever is earlier. You’ll aliso lose the interest subsidy that some income-driven plans offer. With this subsidy, the government covers unpaid interest charges on some of your loans for at least three years. But if you don’t recertify, you’ll lose this perk.
Your Family Size Could Change to 1
If you submit your income information but forget to include your family size, your loan servicer will automatically set your family size at one. If you have a larger family, this calculation would result in unnecessarily high monthly payments. Make sure to include your family size so your loan servicer doesn’t make this assumption.
Interest May Capitalize
When you don’t recertify, you may also see that unpaid interest capitalizes, or gets added on to your principal balance. As a result, you end up paying interest on top of interest, resulting in a more expensive loan. Interest capitalization occurs when you forget to recertify your income on IBR, PAYE, and REPAYE. The Income-Contingent Plan is the only exception to this rule.
You Could Stop Your Progress Toward Public Service Loan Forgiveness
Finally, failing to recertify your income-driven repayment plan could temporarily stop any progress you’ve made toward Public Service Loan Forgiveness (PSLF). This program forgives your loan balance after 10 years in public service and 120 payments on an income-driven repayment plan.
The Takeaway
Income-driven repayment plans can help if you need lower federal student loan payments to make them more affordable. But you have to recertify your plan every year to remain on it. Borrowers have not had to recertify their income-driven repayment plans since March of 2020, when student loan payments were paused in response to the pandemic. However, payments are set to resume in autumn 2023, and the deadline to recertify is at least six months after the payment pause ends. Your loan servicer should send a reminder before your recertification deadline, but it’s a good idea to keep track of the deadline on your own as well. If you also have private student loans to pay, these loans are not eligible for income-driven repayment. However, you may be able to lower your payments if you refinance your student loans. Student loan refinancing is a process of exchanging one or more of your current student loans for a new loan with a private lender. Refinancing student loans may result in a lower interest rate, which might save you money, and new refinance terms. Just be very careful about refinancing federal student loans. When you refinance federal loans they become private loans and are then ineligible for federal repayment plans, forgiveness programs, and federal other protections. If you need any of these programs, refinancing federal student loans doesn’t make sense for you. If you’re exploring the option of refinancing private student loans for better terms, Lantern by SoFi can help. With Lantern, you can quickly and easily compare rates and terms from multiple lenders all in one place to find the best option for your needs. Check your student loan refinancing rates with Lantern.
Frequently Asked Questions
How do I renew my income-based repayment?
Do I need to reapply each year to income-based repayment?
How often do you need to recertify for IDR?
Photo credit: iStock/mihailomilovanovic
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About the Author
Rebecca Safier
Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
