Boston Student Loan Lawyer

This is Part 4 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.

A recap:

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.

That brings us up to speed. I faxed over my most recent documentation on December 13, 2012. But this just does not end. Here is a timeline of what has happened since my last post:

December 17: I received an email from my servicer notifying me that my IBR paperwork had been successfully processed. Woohoo!

December 18: Seeing that my online account was still showing an obscene bill due at the end of December, I called my servicer to find out what had been going on (since I was told via email that everything was processed). Turns out that my paperwork was NOT processed (no one could tell me why I received that email). I was told that the IBR documents should still be processed by the December 28 billing date. If they are not processed, I would be granted what’s called an “administrative forbearance,” meaning my bill is effectively cancelled but interest is not capitalized, which is a good thing.

(If you remember, forbearance allows you to postpone your payments under certain circumstances, but most types of forbearance will result in the capitalization of interest– meaning interest is added back to your principal, and then interest is charged on that higher amount thereafter. This is why forbearance can cause balances to increase rapidly over time. During IBR, interest accumulates but is not capitalized for subsidized loans. A brief and very temporary “administrative forbearance” would postpone the payment for a month but would not result in interest capitalization; any other forbearance would cause that non-capitalized interest to be capitalized, resulting in larger interest accumulation thereafter).

December 20: I called my servicer again, and again was told that the IBR paperwork had not been processed, but I could get an administrative forbearance if necessary.

December 24: Merry Christmas! I called my servicer yet again. Here’s where things get really exciting. You’ll love this. Here’s what I was told:

1. Not only had my IBR paperwork still not been processed… it might not get processed until January, and it might not go into effect until February. WAIT, WHAT? If you remember, in Part 1 of my series I was told that my IBR recertification was scheduled for December, and I was specifically told to send in the appropriate documents at the end of November (and that was only after I did some serious digging, because no one was even planning on telling me what documents I had to send, or when). If this was going to take three months, why wasn’t I told to send in the documents sooner than November? And even more interestingly, why does it only take a few days for my servicer to decide that my paperwork is insufficient to process because of a missing “page 2” of my tax return, but it takes months to process the paperwork again, since they already had the core important documents? Oh, but it gets better.
2. I was also told in this same call that I could request an economic hardship forbearance, but not an administrative forbearance. An economic hardship forbearance would result in interest capitalization, which means that because of my SERVICER’S actions, I would effectively be charged higher interest for the remaining life of my loan because un-capitalized interest would be capitalized. It’s either request an economic hardship forbearance, or pay the massive bill due in a couple of days. Why was this customer service rep telling me something completely different than what I was told during the prior two calls?

I demanded to speak to a manager. After a long hold, I was put on the phone with a nice gentleman who said he was a supervisor. He told me that he would expedite my IBR request and put me in an administrative forbearance to prevent both the December payment from being due and to protect me from interest capitalization. He said this should be taken care of in early January.

December 28: I confirmed with my servicer that the administrative forbearance is in effect, and my new IBR payment will be available for my January billing date.

WHY IS THIS SO HARD? Stay tuned. I’m really hoping the next installment of this series is the conclusion. Really, really hoping.

This is Part 3 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 the month that 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.

On December 11, 2012, I checked my online account and saw that despite my efforts, I have been kicked off of IBR and put onto the Standard repayment plan, resulting in a payment due at the end of December that is almost 5 times higher than it should be, and certainly something I cannot afford. I immediately called my servicer to find out what was going on. I was told that on November 30, my IBR application had been denied because I did not submit all the pages of my tax return. I was never notified about this, by email or by regular mail, and I never would have known about this if I had not called. If I had auto-debit and didn’t bother checking my account, I could be in for a real surprise. I also was not aware that my servicer needed my full tax return, as the Adjusted Gross Income figure (which is the basis for IBR) appears on the first page of my tax return. After speaking with a customer service representative, I was instructed to send in all the pages of my tax return by fax so that it can be processed quickly.

So, I will now be faxing over my full tax return (all pages). To be safe, I am also re-sending the Repayment Plan Selection form, along with a cover letter from me explaining the situation. I am, naturally, quite nervous that this won’t be processed in time for my December 28 billing date, which means I’ll either have to pay the higher amount, or go into temporary forbearance.

The federal loan servicing system is a complete mess. I am a student loan attorney, I know exactly what I am doing, and I have been totally proactive in trying to stay on top of this and do everything right. Despite my best efforts, I too have been kicked off of IBR and I am being billed an amount that is extraordinary. It shouldn’t be this hard. It shouldn’t be this stressful. This is ridiculous.

Stay tuned as the saga continues.

This is the second installment of my ongoing, real-time process of re-certifying my income to the U.S. Department of Education so that I can remain on the Income-Based Repayment (IBR) plan. As many of you know, there have been widespread problems with the IBR re-certificaiton process, so I am documenting my own experience to see if there’s any wisdom I can send to other borrowers who have to go through the same thing. In Part 1 of this series, I tried to obtain from the Dept. of Education the month that I would have to re-certify. That was a fun experience (that’s sarcasm).

In Part 1, I described the conflicting information I got from the Dept. of Education regarding whether or not I would receive a notification from them telling me that I needed to re-certify to stay on IBR. I never did receive notification, so, knowing that I had to re-certify in December since I had proactively called them several times over the past few months, I thought it would be time to get the ball rolling, given that it is now early November. I called my loan servicer to figure out what I needed to do. I apparently lucked out and got a customer service representative who was able to email me instructions and blank application forms telling me exactly what to do. Excellent! There’s hope! Maybe! I eagerly completed the Repayment Plan Selection form (selecting IBR, of course) and attached a copy of my 2011 tax return which shows my Adjusted Gross Income (that will be the basis for the IBR calculation). I was told that I did not need to submit the Alternative Documentation of Income form unless I did not file a tax return last year; so, I did not send in this form.

I mailed AND faxed the completed and signed Repayment Plan Selection form with the copy of my tax return to my loan servicer. I’ve already paid my November bill, so we’ll see what December looks like. Stay tuned.

I’ve blogged extensively about the many problems with the U.S. Dept. of Education’s federal loan servicing system, particularly the issues surrounding Income Based Repayment (IBR) and borrowers being kicked off of that repayment plan when they don’t re-certify quickly enough.

Well, it’s my turn. I don’t mind admitting that I have a healthy balance of federal student loans myself (law school is expensive!), and I too am on IBR. But it’s that time of year where I have to re-certify my eligibility for IBR. Given everything I know about the horrible IBR re-certificaiton system, I thought it would be fun to incorporate my experiences into this blog to exemplify what others might be going through. I hope this turns out to be a boring story where I turn in my paperwork to my federal loan servicer and I remain on IBR with no problems. If that happens, I’ll provide an overview as to what I think I did right. On the other hand, if I have to go through some of the nightmarish experiences that I know others have been through, you’ll at least get some entertainment, I’ll get to vent, and maybe (given the widespread readership of this blog) someone will notice.

Part 1: Figuring Out When and How to Renew IBR Eligibility

Several months ago, I called my federal loan servicer to find out my one-year IBR renewal date. I was told December. I then asked if I would be notified in advance as to what paperwork to submit, and where to submit it. I was told I would receive no notification in advance. Swell. I’m feelin’ great about this already.

Fast forward to Monday of this week. It’s the end of October, so I figured it was time to confirm some details. I called my federal loan servicer again, and asked when my one-year IBR renewal date would be. I was told June. Wait, what? June? Last time, I was told December. Now I have an extra 7 months I didn’t know about?

I politely explained my confusion, and the customer service rep then spent about six or seven minutes quietly going through my file (how much is there to go through? Seriously?). Finally I’m told, “Oh, yes, it says here that you have to renew in December.” Good thing I had her double-check that, because otherwise I might have waited until June and gotten myself into some big trouble. Now, since I won’t be receiving notice or anything… “Oh, you’ll actually get notice about 45 days in advance of the renewal date.” Oh, really? Because I was told something very different the last time I called; can you tell me what exactly I’ll receive in the mail and what I have to submit? (This is funny because I’m a student loan lawyer, so I know exactly what forms they should be sending me… I’m just playing dumb so I can see if she knows what she’s talking about.) “Well, I’m not sure, but whatever relevant paperwork you’ll need will be sent to you.” And what if it’s not sent to me, what then? “Well, I’d call back in mid November if you haven’t heard from us.”

Fantastic. So my IBR renewal date is probably December (such confidence there). I either will, or won’t, get some sort of advance notice, but if I do, we’re not quite sure what that notice will look like, what forms will be sent, etc. Brilliant! We’re off to a great start.

To be continued…

If you recall, the Obama administration launched a student loan initiative several months ago. One prong of this initiative was to accelerate the date on which “improved” Income-Based Repayment (IBR) was slated to take effect.

IBR, if you don’t know, is a fantastic repayment program for federal student loans where borrowers pay approximately 15% of their income towards their federal student loans, and whatever remains of the loan balance after 25 years is forgiven. The “new and improved” IBR (which is now being called “ICR-A”) would reduce monthly payments to 10% of discretionary of income and would reduce the repayment period to 20 years. This is a fantastic improvement. Of course, not everyone is eligible.

Last week, the U.S. Department of Education released new regulations governing who is eligible for this “new” IBR (aka, ICR-A). Here’s what the new regs say:

• You must have had no outstanding federal student loans as of October 1, 2007, AND
• You must have received a new federal student loan on or after October 1, 2011

This effectively cuts out many borrowers, unfortunately, which makes sense since the program is designed primarily for “new” borrowers. Moreover, the way the regulations are written, consolidation loans will not be sufficient to qualify someone for the new IBR program if the borrower did not already meet the above criteria prior to the consolidation. That said, this is a new, great option for students who will be graduating in the coming years and meet the eligibility criteria.

I’ve blogged about Income-Based Repayment (IBR) several times over the past couple of years. It’s a fantastic program for federal student loan borrowers, where your monthly payment is calculated as a percentage of your adjusted gross income, regardless of how much you owe. For many borrowers, it’s the only affordable payment plan available.

Borrowers who are on IBR will see their payments adjusted annually based on income changes, which makes sense given that the plan is income-sensitive. In the past, the Dept. of Education would automatically keep borrowers on IBR and would simply get updated income information directly from the Internal Revenue Service. As I’ve blogged about extensively, since the Dept. of Education has outsourced federal loan servicing to private contractors, there have been numerous problems recently where borrowers are being kicked off of IBR because these servicers are no longer automatically getting income information from the IRS.

The bottom line seems to be this: for most people who have federal loans and are on IBR, you are going to have to affirmatively re-apply for IBR on an annual basis in order to avoid being kicked off and placed on the Standard repayment plan. Sometimes, the servicers will not even send you notice; you have to keep track of everything yourself. I have confirmed this with at least two servicers: www.MyEdAccount.com andwww.MyFedLoan.org (which handles borrowers potentially eligible for Public Service Loan Forgiveness). I do not know if this is the case for other servicers (such as Mohela), but I would bet it is. You should find out when your IBR “year” is up by contacting your servicer, and then plan ahead by submitting the appropriate forms and income documentation before your year is up.

Following my recent article about the new federal student loan servicer arbitrarily kicking borrowers off of IBR, I have been receiving lots of emails from you all about your experiences. Thank you! The National Consumer Law Center (NCLC) is working hard to try to get the Department of Education to fix these problems.

Please keep the stories coming! Every single one is helpful. If you’ve experienced problems with the new federal student loan servicer (www.myedaccount.com), let me know. Please provide the following info:

1. A detailed description of the problems you experienced, as well as your attempts to correct them.
2. Your name and occupation.
3. Whether you are willing to share your name and email address with the Dept. of Education (through NCLC’s efforts to collect stories and correct the problems).
4. Whether you are willing to speak directly with the Dept. of Education, with NCLC’s support, about your specific experiences.

Again, thank you all, this is enormously helpful.