Income-driven repayment plans cap your monthly student loan payments between 10 to 20 percent of your available monthly income with the specific amount depending on the plan and family size. But since your income and family situation can change from year-to-year, you have to recertify both annually.
Recertifying is easy, but the consequences can be serious if you don't do it. Fortunately, it takes just a few minutes to submit your forms and provide required documentation.
When should you recertify your student loans?
If you've chosen an income-driven repayment plan, you need to recertify your income and family size once every year – even if there haven't been any changes. Recertification happens around the time you first started your income-driven plan and you have to submit your recertification request within 10 days of this time.
Your loan servicer should send you a reminder notice when it comes time so watch for it in the mail. As soon as you get this notification, it's a good idea to complete your paperwork even if it isn't due yet.
How to apply for income-driven repayment
Recertification is necessary only if you're already on an income-driven plan. If you aren't yet making student loan payments based on your income, you could apply for one of four plans including:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
You can submit an application online through the Federal Student Aid website but you'll need an FSA ID. The entire process takes around 10 minutes and you only need to submit one application to be considered for all of the income-driven options.
During the application process, you need to provide personal information including your name, address, birth date and Social Security number. You can choose to have your income documented electronically through a connection with the IRS. If you don't want to use past tax data because your income has changed, you'll be provided with instructions for submitting documentation to your loan servicer.
How to submit your recertification
Once you've signed 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, you'll choose to “Submit annual re-certification of my income.”
Again, you'll need to log in with your FSA ID and can complete the entire process online. You'll be asked a few simple questions about your family size and income as well as your marital status. And you'll be able to choose the option to have the IRS provide your income information or to submit documentation directly to your loan servicer.
If you prefer to submit a paper recertification, you can download the application and return it to your loan servicer along with required documentation.
Documents you need to recertify your income-driven repayment plan
If you don't want to have the IRS retrieve your income information, you'll need to submit other proof of earnings such as a letter from your employer or recent pay stubs. At least one form of documentation of income is always required.
What happens when you don't recertify?
If you do not recertify your income-driven plan by the annual deadline, any interest that went unpaid on your loan will be capitalized. This means it's added onto the principal balance of your loan. If you owed $10,000 and had $500 in unpaid interest, for example, you'd owe $10,500 after capitalization. You'd have to pay interest on a larger loan balance going forward, making repayment more expensive.
If you are making payments on the REPAYE plan, you will also be removed from this plan if you don't recertify. You'd be placed on a new plan with monthly payments determined by either the amount needed to repay your loan by the earlier of 10 years from the date your new payment plan starts or to repay by the end of the REPAYE plan repayment period.
If you're on any of the other income-driven plans, you'd stay on it if you don't recertify but your payment would jump up to the amount due under the Standard Repayment Plan, which is designed to be repaid over 10 years. Instead of payments based on income, they'd be calculated to allow you to repay the amount due on your loan when you first entered income-driven repayment.
If your plan is changed or payments go up, you could change to an income-driven plan again by providing appropriate information to your loan servicer.
Make sure you recertify your plan on time
Income-driven payment plans make federal student loan repayment affordable so you don't risk missing payments and defaulting on federal student loans. You should always make sure to recertify your loans each year. You also want to make certain you've selected the correct income-driven plan and, if you're struggling to pay, you may wish to consider Direct Loan Consolidation which enables you to choose payment plans with a longer repayment timeline and lower monthly payments.