Income-driven repayment (IDR) plans can be helpful financial lifelines if you’re struggling to keep up with your student loan payments. These plans modify your monthly payments based on your income and family size, and the amount you pay is determined as a percentage of your discretionary income.
One thing you should take note of, however, is that you have to renew your plan annually so that you continue to be enrolled.
You can’t always be sure your loan service will remind you each year, so set a recurring reminder on your phone now if you’re already in an income-driven repayment plan.
It might seem like a hassle or chore, but renewing your income-driven repayment plan isn’t that complicated. These step-by-step instructions can help guide you from start to finish. We’ll also show you how to enroll if you want to join one of these plans to ease your debt repayment burden.
How to Renew Your Income-Driven Repayment Plan
If you are already registered for an income-driven repayment plan, start the renewal process about one or two months before your annual deadline comes around so that you have enough time to troubleshoot any errors, if they arise. Before you get going, make sure you have your Federal Student Aid (FSA) ID and information about your family size and income on hand, because you’ll need to provide this as part of the process. Once you have all of your information together you have a choice to renew your income-driven repayment plan by mail or online.
Head to the Federal Student Aid (FSA) website and click on “Repayment & Consolidation.” Then select “Apply/Re-Certify/Change an Income-Driven Repayment Plan.” Once you navigate there, scroll down to view the menu where you can select the reason for your visit and you can indicate that you are doing your annual re-certification.
In this “Returning IDR Applicants” section, click on the “Log In To Start” button to the right of the “Submit annual re-certification of my income” section.
After logging in, you’ll be prompted to answer a few different questions pertaining to your request. First, you’ll select the option that indicates you’re submitting documents for annual recertification.
Next, the website will ask you to fill out personal information about your family size and income. Fill out this section as it pertains to your current situation.
Once you’ve reviewed, signed, and completed the online form, notify your loan servicer that you have submitted the recertification. If you have more than one servicer, you will only need to submit the form once, as the FSA website should notify all loan servicers involved in your loans.
Renewing by Mail
Download the official income-driven repayment renewal form. You can also find this on the FSA website or your loan servicer’s website.
Print the form and fill it out. Depending on your student loan servicer, you can opt to upload the file to its website or submit it to your servicer online or via fax or mail. Once your servicer receives the document, it will notify you.
Be sure to mail the request form to each individual servicer if you have more than one, as this method requires that you do so.
It’s important to stay organized when it comes to your student loans because if you miss the annual deadline to recertify your income and family size, you could face some difficult consequences.
What Happens If You Miss the Deadline?
If you’re on a Revised Pay As You Earn (REPAYE) plan and you fail to recertify, you’ll be removed from the plan and automatically be given a new repayment plan in which the monthly payments are no longer based on your income. This new plan will base the payment amount on what’s necessary to pay your loan in full by either 10 years from the date you begin repaying your loan under this new plan, or the end date of your 20- or 25-year REPAYE plan repayment period.
If you’re on a Pay As You Earn (PAYE), Income-Based Repayment (IBR) plan, or Income-Contingent Repayment (ICR) plan and you miss the deadline, you’ll still remain on that plan, but your monthly payments will be calculated based on what you would pay on a Standard Payment Plan with a 10-year term. The government will use your outstanding balance from when you first entered your income-driven repayment plan to determine these new payments.
Income-Driven Repayment Plans
Remember, there are four different ways you can pursue income-driven repayment. If you haven’t yet enrolled, review the alternatives so you can choose the option that’s best for you and your current financial status. Read about each plan below and then use the federal government’s calculator to determine what you could qualify for.
1. Income-Based Repayment (IBR) Plan
IBR plans will modify your monthly payments based on your income and the size of your family. This number is determined as a percentage of your discretionary income. The percentage you will pay is based on when you took out your loan. If you borrowed the money before July 1, 2014, then it’ll be 15% of your discretionary income with a repayment period of 20 years. If you borrowed the money after that date and are a new borrower or had no outstanding federal student loans when you borrowed the money, then it’ll be 10% of your discretionary income with a repayment period of 25 years.
2. Pay As You Earn (PAYE) Plan
The PAYE plan is contingent on your monthly income. As your salary increases throughout your career, so too will your payments under this program. Usually, you’ll end up paying about 10% of your calculated discretionary income with a repayment period of 20 years. You can only qualify for this plan if you’re considered a “new borrower” and received your first federal loan on or after Oct. 1, 2007.
Additionally, you must not have had any outstanding balances on Direct Loans or Federal Family Education Loans (FFEL) when you received that first loan. Lastly, you must have received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or a Direct PLUS Loan on or after Oct. 1, 2011, or a Direct Consolidation Loan on or after Oct. 1, 2011. If you’re not eligible under the PAYE plan, you may be eligible under the REPAYE plan.
After 20 years on this plan, your outstanding balance is forgiven.
3. Revised Pay As You Earn (REPAYE) Plan
The REPAYE plan is available to any borrower with eligible federal student loans. Similar to the PAYE plan, with REPAYE, your monthly payment is generally 10% of your discretionary income. The repayment period ends after 20 years if you borrowed the money for your undergraduate degree, and 25 years if you used the money for graduate or professional study.
4. Income-Contingent Repayment (ICR) Plan
ICR plans are available for borrowers with eligible student loans, and they’re the only IDR plans available to Parent PLUS borrowers if they consolidate their loans with a Direct Consolidation Loan. Compared with IBR plans, ICR plans don’t have income requirements, although you do need to re-verify your income and family size each year, as your payments are contingent upon your income.
This could also mean that your monthly payments are lowered as much as they would be with IBR, which could be a good thing if you want to pay less interest over the life of your loan. Your payment amount is based on either 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years—whichever is the lesser amount. Your repayment period is generally 25 years.
Should You Use an Income-Driven Repayment Plan?
Federal income-driven repayment plans are not your only option for repaying your student loans, and it’s a good idea to continually review the advantages and disadvantages of these plans to make sure they’re right for you.
Using an income-driven repayment plan may be beneficial to individuals struggling to make monthly payments or those who are in need of federal assistance with repaying loans.
If you stick with the plan for its duration, you could qualify for forgiveness of your outstanding balance.
With an extended loan term that lowers your monthly payments, you might end up paying more money in interest in the long term.
You can’t qualify for a lower interest rate on your federal loans, even if your credit improves.