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.