The importance of recertifying an income-driven repayment plan

Annual RecertificationA large number of college and university students benefit from income-driven repayment plans such as IBR and PAYE. These programs help lower monthly payments from the often-overwhelming amounts required under the Standard Repayment Plan to something more attainable but require an annual recertification.

However, these plans are not a one-time solution and must be “recertified” annually.  The recertification process confirms the continued eligibility and adjustment of your monthly payment will be made based on any changes to your income or family size. Every individual is required to recertify income-based repayment plans regardless if your income or your family size has changed. If you forget to make a recertification payment, your forthcoming payments will no longer be based on your income. Your plan will automatically revert to a Standard Repayment amount or more if you’re on ICR or REPAYE. This is an important step that Prosperity Benefit Services can easily help you with getting under control.

What Is Recertification for Your IBR?

The recertification process is the submission of a new application for your income-driven repayment. This application is the same application you filled out originally, but you would indicate your submitting documentation for payment recalculation. An IBR proof of income typically consists of your Federal Tax Return. If you did not file a return in the last 2 years or perhaps your return doesn’t reflect your current circumstances, a recent pay stub or confirmation you aren’t receiving income is usually acceptable. Anyone on an IDR plan(s) with multiple servicers would need to recertify with each servicer. Annual recertification is necessary and must be completed before the deadline or anytime your income or family size changes. If this is the case, you might discover you need to recertify several times a year. Prosperity Benefit Services has educated and continues to educate all its employees to properly and accurately recertify income-based repayment plans to avoid any issues or interruptions.

What Happens If You Forget to Recertify?

Your existing IDR plan is no longer being based on your current income and more than likely increased to the Standard Repayment amount. Regrettably, things get more complex because there are other reasons why failing to recertify could impact you.

For example, having auto-pay enabled when your monthly payment increases can most certainly cause your bank account to overdraft due to the change of payment amount. This means over- draft fees can be charged. This can be inconvenient especially if you are caught off guard.

The subsidized interest has the possibility of being added to your principal balance, too. This runs the risk of costing you thousands of dollars over the life span of the loan.

Also, you might have the chance to obtain a hardship forbearance while in the process of mitigating your recertification. The possibility of interest accruing is real.

Of course, there is the chance that your payoff date would be delayed and may cost you money. How? If you’re hoping for loan forgiveness whether it’s under one of the other income-driven plans or not, the payments being made during the forbearance period may not count.

Is It Common to Forget to Recertify?

The Department of Education reports 57 percent of borrowers fail to recertify their income-based repayment plans. This is more than half the individuals who have income-based repayment plans. Lenders do send reminders, but there is always the possibility a reminder might get lost in transition and/or be late arriving in your mailbox. There is also the chance you do get the reminder, but life can sometimes get in the way. This is unfortunate and may cause you to miss your deadline. Even submitting paperwork early on doesn’t always guarantee everything will be processed in a timely fashion. In addition, servicers being overwhelmed with other paperwork and the likelihood of your information get lost can happen.

The Best and Easiest Way to Recertify

With a Prosperity Benefit Services Membership, you don’t need to worry about a recertification ever again. Once you have furnished us with the initial date your loans were consolidated or approved, our system will record the date for future use. Our experts will call you and send an email with clear instructions on what is needed from you in order to move the process forward. At this point, we will be in full control and you will no longer have to stress about completing the recertification on your own ever again. We will recertify your income-driven repayment plan annually until your term in completed.