This is Part 5 of my ongoing series documenting my own experience with Income-Based Repayment (IBR) annual re-certification. As many of you know, there have been widespread problems with the IBR re-certification process, so I am documenting my own experience to see if there’s any wisdom I can send to other borrowers going through the same thing.
- In Part 1 of this series, I had some major trouble getting a straight answer from my servicer regarding when I needed to re-certify my income to stay on IBR.
- In Part 2, after I received no reminder or notification from my servicer at all whatsoever, I contacted my servicer to request the appropriate forms and instructions to re-apply for IBR; I then submitted the appropriate documentation: the Repayment Plan Selection form, along with my most recent tax return showing my Adjusted Gross Income. I hoped for the best.
- In Part 3, I discovered through a routine check of my online account that, despite my best efforts, I had been kicked off of IBR and billed an extraordinarily high payment for the month of December. After calling my servicer, I was told that they had not received the second page of my tax return, and thus had been removed from IBR. I faxed over everything again (including the second page of my tax return) and was told that it should be corrected within 10 days, by the time my December payment is due.
- In Part 4, I had multiple calls with my loan servicer trying to get my IBR paperwork processed in time for my December payment. After many ups and downs, I finally spoke to a manager who promised to put me in a special temporary administrative forbearance for December and expedite my IBR application in time for my January billing date.
That brings us up to date. The good news is everything has now been resolved. My IBR paperwork has been processed, and my payment has been properly and accurately calculated for my January billing date. Huge sigh of relief.
But this has obviously been a needlessly frustrating experience, one that I hope not to repeat… and unfortunately, these types of problems are all too common. Here are some things I’ve learned during this process that I think will be helpful to other borrowers.
- Know in advance when your 12 month IBR “year” is up. You have to re-certify your income and re-apply to IBR every 12 months. Mark your calendar well in advance so you know when that time is coming, and contact your servicer 2-3 months in advance to obtain instructions and appropriate paperwork. My servicer did not notify me, and has not notified thousands of other borrowers; you must be proactive and do your homework. Otherwise, you’ll be in for a very rude surprise.
- Make sure you submit all the required paperwork and every page of every required document. For most borrowers, you’ll have to submit the Repayment Plan Selection form and proof of income, which for most people will be a copy of your tax return (however, don’t take my word for it; check with your servicer to find out exactly what you need to submit). What caused a big snag for me is that my servicer did not receive the second page of my tax return. The first page had all the important information, including my Adjusted Gross Income (which is used to calculate the IBR payment), but the missing second page derailed my entire application. The same could be true if a page of the Repayment Plan Selection form was missing. So, be sure to submit EVERYTHING.
- Communicate in writing. I have honestly gone back and forth on whether it is necessary to include a cover letter with your materials. After going through this experience, I think it is a good idea to include written correspondence with everything that you submit to your federal loan servicer. It doesn’t have to be anything fancy, but explain what it is that you’re doing and what you’re submitting; date and sign the letter, and keep a copy for your records. While I have no idea how helpful this will really be, at the very least, someone will read it and hopefully put your paperwork in the right hands, and you’ll be creating a written record of your ordeal.
- Follow up, follow up, follow up. I was not informed that my IBR application was rejected because of the missing page of my tax return. The only reason I figured it out was because I checked my online account and saw a terrifyingly large payment due for my next billing date, indicating I had been kicked off of IBR. When you submit your IBR paperwork and proof of income, follow up with your servicer regularly (I’m talking every couple of days) to make sure that they have everything, that your application is being processed, and that nothing has gone wrong. Don’t assume that anyone is going to tell you if something is wrong or missing; in fact, they probably won’t.
- If there’s a problem or a delay, be very careful about forbearance. During IBR, interest is not capitalized (added back to your principal balance) for subsidized loans. This saves you money. If you leave IBR, however, by changing repayment plans or by going into forbearance (which allows you to postpone your payments), your uncapitalized interest will be capitalized, and interest will then accrue on that larger balance for the remaining life of your loan. This can cost you a lot of money. My servicer tried to convince me to go into a temporary economic hardship forbearance in order to postpone my payment and allow for my IBR application to be processed; if I had done that, thousands of dollars in uncapitalized interest would have been capitalized. Instead, I was able to obtain a temporary “administrative forbearance” which did not capitalized the interest. This is much, much better than any alternative, and while your servicer is not required to provide this for you, it doesn’t hurt to ask.
- Don’t be afraid to ask to speak to a manager. In terms of my own experience with my federal loan servicer, the customer service representatives are usually very nice, but unfortunately they often provide inaccurate or misleading information. I honestly don’t think this is deliberate; I think this is because student loan laws, regulations, and processes are needlessly complicated and tricky, and these employees are inadequately trained. But there were multiple times during my IBR recertification experience where I was given two different answers by two different customer service reps. This was incredibly frustrating. If you are being given contradictory information or not being helped, don’t be afraid to ask for a manager. I honestly believe that the only reason why my situation got resolved was because I asked for a manager.