More than 8 million federal student loan borrowers use income-driven repayment plans. These plans can drop payments to $0 based on a borrower’s income and family size. And after 20 or 25 years — 10 if you work in public service — any remaining balance is forgiven.
But to stay on these plans, you must recertify your personal information annually. Failing to do so can lead to consequences like increased payments, a bigger loan balance and, eventually, default.
Yet more than half of borrowers miss their deadlines, according to data from the Department of Education.
A new law addresses this issue by letting borrowers opt in to automatic recertification. James Kvaal, president of the nonprofit Institute for College Access & Success, expects this change to take months, not years, to implement.
“Borrowers should continue to watch for recertification requirements,” Kvaal says, “and when the opportunity comes to opt in, they should.”
You will still likely have to recertify income-driven plans manually in 2020. Here’s how to hit your deadline.
WATCH FOR REMINDERS
Your servicer, the company you make payments to, must inform you of your recertification deadline. It may do this via email, letter or phone call.
A federal loan servicer spokesperson said borrowers must be notified at least twice, 90 and 60 days before their deadline, but some servicers use more touchpoints.
Ignoring these messages tripped up Jeffrey Dohm, 36, of Salina, Kansas.
“I was pretty much just paying with automatic withdrawals,” Dohm says. “I didn’t really log in to my account all that often, and so I missed notifications.”
He realized something was wrong after a $500 loan payment was withdrawn from his bank account — roughly four times his regular amount. Dohm says he had enough of a cushion to avoid overdrafting but had to temporarily pause repayment due to the lost savings.
He now checks his student loan account “every couple of months” for notifications and advises others to do the same.
MARK YOUR CALENDAR
Deadlines stay the same if you recertify on time each year, so set your own reminder in case you miss your servicer’s.
Robert Lowen, 47, of Sarasota, Florida, uses a calendar program and creates alerts to remember his date.
“Although (recertification is) not a difficult process,” he says, “too many things can and do fall through the cracks.”
Lowen says aligning the process with another annual task, completing his taxes, also helps him remember. He’s missed recertification only once in nine years.
Borrowers who don’t know their deadline can find it in the National Student Loan Data System. Your servicer can also confirm the date.
APPLY EARLY AND ONLINE
Recertifications take about two weeks to process but can be longer depending on your financial situation. For example, someone with irregular income may need to provide additional documentation — like pay stubs or a letter from an employer — to finish.
A federal loan servicer spokesperson said borrowers should submit everything within the 90-day window before their deadline to avoid delays.
You can recertify via a paper form or at studentaid.gov. Online renewal is preferred, as it streamlines processing and lets you import income information directly from the IRS.
Don’t pay a third-party debt relief company for help.
“Borrowers should avoid paying for services the federal loan servicers provide for free,” Education Department press secretary Angela Morabito told NerdWallet.
Borrowers who miss their recertification deadline should take immediate action.
“Get that paperwork in as soon as possible,” says Persis Yu, director of the nonprofit National Consumer Law Center’s Student Loan Borrower Assistance Project.
Consequences start 10 days after the missed deadline:
— Payments become based on what you owe, rather than your income, and typically increase. Lowen says his bill rose from $160 to around $900.
— For most income-driven plans, all unpaid interest capitalizes — that is, it's added to your balance, increasing the amount you pay interest on.
— Loan forgiveness can be delayed. Dohm, a therapist at the nonprofit Central Kansas Mental Health Center, says missing deadlines has cost him four payments toward Public Service Loan Forgiveness.
During that 10-day grace period, you can ask your servicer to pause payments via an administrative forbearance while you sort out your paperwork. Forbearance is also available after that point, but the unpaid interest will have capitalized.
“It’s a process that requires perfection,” Yu says, “and nobody is perfect.”
That includes her — even Yu says she’s missed her recertification date before.