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Re-Certification of Income for Federal Student Loans – Can I do it Myself? Should I? can you trust your student loan servicer when they don’t follow the law 61% of the time per a recent Inspector General’s Report?

Let’s look at a relatively simple chore – re-certification of income under an income driven plan.  What appears to be simple, can have meaningful impact.  If nothing has changed, you likely can do it yourself – but do yourself a big favor and keep reading just in case.  Here is a brief explanation of what we do to re-certify the borrower’s income to remain in an Income Driven Plan (IDR) for federal student loans:

When we are asked to re-certify an IDR plan, we ask that the borrower advise of their marital status, income of each spouse, # and circumstances of dependents, amount and type of federal loans, and lastly whether the borrower is working or intends to work public service.  There are times that nothing has changed from the borrower’s prior circumstances the previous year and we likely would simply submit their tax return to renew.  We would need to obtain a signed authorization form and often follow up with the servicer(s).  We are often re-explaining how the forgiveness works, the 1099 expectation, impact on their credit, ability to qualify for a mortgage one day.


However, often circumstances have changed.  That’s where we shine.  If our client is newly married or divorced, we may advise how and when they should file their taxes or use alternative income documentation to re-certify for the lowest payment.  In some situations, we may even suggest a change in the IDR repayment plan to exclude the spouse’s income, or drop to a lower percentage such as Repaye and five year shorter plan if they want to file jointly.

We compare the likely tax hit to the student loan savings to see which option would be best.  If they earn more income and are no longer projected to obtain forgiveness, we would suggest non-income driven plans going forward unless nearing retirement.  We advise whether consolidation makes sense such as if now working Public Service in order to qualify with the newer Direct loans, what loans not to consolidate if Parent Plus loans, explain capitalization if switching between IDR plans, and explain the public service requirements if applicable.

Much of our job is counseling the borrowers about their options with the eight different income driven plans, and explaining the ramifications and benefits of each, as well as the impact of a potential 1099 at the end of the road.  Unfortunately, the recent Inspector General’s audit of federal servicers shows that 61% of borrower calls resulted in misinformation and inadequate explanation of options.  Even worse, the Department of Education backs its federal servicers and is not taking sufficient action to ensure compliance.  I would venture to say that it appears virtually no action is being taken.  It’s so bad, Rolling Stone, describes the situation as akin to a “trainwreck”.  The Washington Post describes it as “sloppy oversight”.

I bet that if I misled my clients and didn’t follow the law 61% of the time, I’m pretty sure the Florida Bar would have something to say about that!

Real Life Client Saves $300,000:  after 8 years on an income driven plan working toward PSLF forgiveness as a public service employee, our client got an awesome job making well over six figures but still working in public service.  Her servicer now informed her that she was ineligible for IBR because she no longer had a hardship.  Her federal student loans had ballooned to over $300,000 and she was being told that forgiveness was now off the table.  She and her mother scheduled a consultation with me.  We advised her to switch to a different income driven plan called Repaye that did not require a hardship.  She can finish out her last two years for PSLF under that program.  The Ten Year Standard Payment would also have worked to qualify under PSLF although it was higher.  Did the servicer bother to mention either of those?  Of course not!  Yes, her payment is higher now with her new income as it should be, but it’s only for two more years.  And she can afford it.  Debt free in 24 months!!  All those years working a 20k something public service job is paying off after all.

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