Hey! I'm Robbie, the founder of Roots Financial Planning, a fee-only, fiduciary advisor located in San Antonio, TX working virtually with dentists across the United States. When I'm not helping dentists live their best life, you can find me making pizza, swimming, or skiing.
When you’re using an Income-Driven Repayment (IDR) plan to pay your dental school student loans, it is crucial that you recertify your income and family size each year. This process will establish your monthly payments for the next 12 months. Not doing so could have disastrous consequences for your repayment strategy.
How do you recertify your IDR plan?
Prior to July 2023, the recertification process was a little bit more time intensive. Now, if you choose to do so, you can let the student aid system recertify your income automatically each year using a link to the IRS website. Each year on your recertification date, the system will automatically pull over your most recent tax return information and calculate your new monthly payment.
Sometimes, it will still be necessary to manually perform the recertification. These times would include, if your income decreases substantially, your family size increases, if you have a unique situation related to your tax filing status, or if you need to use alternative income documentation.
Here are the steps involved in manual recertification:
- Go to studentaid.gov/idr
- As a returning IDR borrower, select the option to begin the process under the returning IDR borrower heading. Be sure to login to your account first.
- You'll have several options to choose from when managing your IDR payment. If you are logging in to recertify as part of the annual process, you will select "Manually recertify my IDR plan."
- Next, it will ask for your consent to link to the IRS website in order to retrieve tax return information.
- Answer questions related to your marital status and how you filed your tax return if married.
- If you are married, you will enter your spouse's personal information.
- Next, it will ask if you've filed your taxes in the past two years and whether your income has decreased.
- If needed, it will then ask you to provide documentation of income if a tax return is not available or does not provide an accurate representation of income.
- Now it will show you estimates of what your new monthly payment will be.
- Then, you will select the plan to proceed with. Most of the time you will not be switching plans.
- Last, you will review all the information you have entered and submit for processing.
When do you need to recertify your IDR plan?
If you are using an IDR plan, you are required to recertify your income and family size once every year. Generally, you will receive a notice from your servicer when it is time to recertify each year. This usually occurs 2-3 months before your previous recertification date.
During your lifetime, your income will generally increase. However, if you have an unexpected decrease in income for any reason, you are allowed to recalculate your monthly payment at that time. This will help to realign your payment amount with your income so that you can continue to make on time payments. To do so, you would proceed to the Student Aid website and choose the “Recalculate My Monthly Payment” option.
Recertifying at any time also applies to your family size. If you have an increase in children or other dependents, it would be wise to recertify early to adjust your payments accordingly.
When you are attempting to make the lowest payment possible, recertify early if your income decreases or your family size increases.
What happens if you forget to recertify?
If you forget to recertify, there are various penalties that vary slightly depending on which IDR plan you were using. For the most part, the penalties are the same, and include the following:
- You will be switched to the 10-year Standard plan and payments will be based on your balance at the start of IDR. In other words, your payment goes up by a large amount in most cases.
- Your servicer will assume a family size of one. If you are single this doesn’t matter, but if you do have a larger family, it will cause your monthly payment to increase.
Luckily, you can still return to your IDR plan of choice if you proceed with a late recertification and still qualify for that plan.
IDR recertification is a fairly straight forward process. Choosing the optimal IDR plan and reducing your monthly payments can be a bit more complicated. If you’re not sure which IDR plan is right for you, Roots Financial Planning is here to help you every step of the way.