Written By Travis Hornsby, CFA®, CFP®
One of the biggest things that has kept me up at night having advised hundreds of millions in student loan debt is how to answer one simple question on the Income-Driven Repayment (IDR) Plan Request form:
“Has your income significantly changed?”
What does that mean? When you’re submitting your IDR Plan Request form for your federal student loans, you want to be honest. But you also don’t want to pay more than you need to.
What is the IDR form used for?
The IDR form is used for federal borrowers who aren't currently on an IDR plan and for those who need to recertify or make changes to their existing repayment plan. The same form is used by all federal loan servicers for each IDR plan, including Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR).
You can complete the IDR form online or by mailing it your loan holder. To complete your initial certification or recertification online, you'll need to log-in to your StudentAid.gov account using your FSA ID and password.
There are detailed instructions for filling out the IDR form. But you should be prepared to provide information about your adjusted gross income, household information (e.g. marital status and family size) and other eligibility requirements. You can use the IRS retrieval tool to quickly submit your income information or choose to support alternative documentation to reflect your current income.
How do you submit an IDR form correctly?
Physicians in residency frequently graduate and suddenly go from earning $60,000 to maybe $250,000. Should you show your new pay stubs or use the past year’s tax returns?
If you say “yes, you earn more” but didn’t need to reveal that, you just paid an extra five-figure amount for no reason.
If you say “no” when you shouldn’t have, you could be at risk of fines, not getting forgiveness or even criminal penalties.
Thank goodness a major change happened on the form that takes away any doubt.
The new IDR Plan Request form makes re-certifying guilt-free
Here’s what the IDR form now says for the infamous question about your income:
From “Has Your Income Significantly Changed” to “Has Your Income Significantly Decreased”
Unless you’re a student loan nerd, then you might have totally missed the earth-shattering change that happened to this criteria question.
Remember, the repayment plan request form used to ask: “Has your income significantly changed?”
Now the IDR form says: “Has your income significantly decreased since you filed your last federal income tax return?”
FedLoan IDR form submissions will now be much easier
If your federal loans are serviced by FedLoan Servicing, applying for your income-based recertification used to be a huge pain because of the ambiguity of this question.
But now that it’s clear that you only need to report your income from your last tax return unless that income has since decreased, you’re in the clear to use tax returns to certify in every case if you want to.
Imagine a brain surgeon who made $70,000 in 2019; $250,000 in 2020; and will make $600,000 in 2021 because they became an attending in September 2020.
That doctor could pay on their small income from 2020 to 2021, the half-year attending income from 2021 to 2022, then finally be paying on an attending level income from 2022 to 2023.
Many high-income doctors pursuing Public Service Loan Forgiveness will now be paying based only on their attending income for as few as one or two years.
Submitting lower income on an IDR form
Remember that just because you can use tax information from prior year tax returns doesn’t mean you have to.
Borrowers who experience a drop in income might do so for various circumstances:
- You went back to school part-time.
- Kids entered the picture and your family size information changed.
- You decided to buy a practice and have a lot of upfront expenses.
- Your spouse quit their job (IDR plans often include spouse’s income information).
- You decide to work remotely.
- Your work offers you a part-time position that you accept.
Since your IDR student loan payments come from what you earn, you have the right to request a recalculation in your payments any time your income falls.
Submitting for a new monthly payment amount using an IDR form is a smart strategy for borrowers who are looking to reduce their hours for family reasons or need low payments to take an entrepreneurial risk.
Can you file for tax extensions for IDR form purposes?
A remaining gray area — and something I’m debating right now with lawyers and student loan experts — is if the government rules allow you to file an extension on your taxes in order to get a lower IDR payment.
You can delay your taxes at no cost. The extended filing deadline is October 15 for tax year 2020.
Imagine that high-earning physician example. You could get into a situation where strategically delaying your tax filing might allow you to use your 2019 returns instead of 2020.
One student loan attorney I spoke with didn’t think this strategy would hold up to scrutiny. Another expert thought it would.
I’ve certainly seen borrowers decide to use that approach before, but we’re still too early for Student Loan Planner® to feel comfortable recommending it.
Since the gray area used to be whether you could use prior-year tax returns, I was super reluctant to recommend tax filing extensions.
But now that the gray area is gone on that issue, thinking about tax filing extensions warrants further consideration.
Need somebody who thinks about the IDR form for you?
We strategize all day about student loan repayment options. If you’d rather have experts who have made thousands of plans create a custom strategy for you, just let us know or check out the “Hire Us” part of the site menu.
What do you think about the new IDR form question? Are you as excited as I am? Let me know what you think below.
Thanks for the updates! That question always gave me heartburn.
Sure Alicia no more now!
Hi Travis,
I love reading your articles and keeping up on the changes and strategies for IDR plans. I am in my first year of repayment and I am wondering if I will get notification of when I have to recertify or if I just have to do it on my own. If the latter, when do I need to do that by. I did my initial IDR application in January of 2019.
You’ll get a notification. Just make sure you’re signed up for SMS updates and email notifications. Probably check back in by January of next year if you havent heard anything.
Travis,
When logging into my FedLoan Servicing account, it tells me that “it’s time to recertify” and gives a link to log in to FSA StudentLoans.gov to complete the recertification. As I click through the Re-Certify online form, I am asked to log in to the IRS to link the recertification application to my most recent tax return.
Basically, in the online form I am not asked the golden question ” has you your income decreased?”. Do I need to fill out a paper form and mail it in order to avoid having to provide last years tax return?
Sure if you want to be safe. But you generally always need to submit last year’s tax return unless your income dropped and you can justify a lower payment in which case use current paystubs or attest to being unemployed.
Hi Travis,
I recieved notice of my recertification due by 12/30/19. ( first time doing a recert)
My question is this, since I was in vet school until Dec of 2018 and didn’t start working until Jan of 2019, my 2018 tax return showed no income and so my payments are currently $0. If I do my recert now before I have filed my 2019 taxes it will use my 2018 return and show no income. Is this ok, or am I obligated to report my 2019 income even though I won’t have filed 2019 tax returns before my recert due date. With the new wording only asking if your income has decreased, it seems like it is ok to use the 2018 tax return, even though there was income for 2019. I am in an IDR plan recommended by SLP consultation
Certify now and use the old return
As you discussed above, I am one of the lucky (?) ones who will experience a HUGE (approx. 97%) decrease in my monthly payment rate starting in 2020, as compared to 2019… Do you think there is there anything I can do to compensate for the high rate I’ve been paying this past year?
I graduated in 2018 and only worked Aug.-Dec. of that year (public service). My 2019 REPAYE rate was based on 1 paycheck during that final quarter of 2018. Since the new rule looks at income tax (instead of a single pay stub), am I able to have my 2019 payment retroactively reassessed (I did not file in 2018 because I had no 2017 income)? Or have it recalculated for these finals 2 months of 2019 so I’m paying the upcoming 2020 rate?
Please let me know if you have any thoughts for us 2018 grads who are in this weird situation. Thank you!
Well you’d have to say that your income changed if you can attest to that being true then that’s the reason to submit a tax return to amend your income. That’s the only problem is that usually when you claim your income changed they ask for paystubs. So I can’t guarantee it will work.
Hi Travis, great information! So glad I ran into this website. I had a question regarding resubmitting my 2020 IDR. My income has significantly increased in 2018 in 2019. Is it possible to continue and resubmit my 2017 tax return?
Unfortunately no you’ll need to provide most recent tax info and if you delayed filing to October they’re in their rights to ask for proof via paystubs if they want.
Travis, do you offer consultation? I’ll be interested to talk to one of your team members or experts.
We do. Check out our service here Todd: https://www.studentloanplanner.com/hire-student-loan-help/
Hi Travis,
Question on this. If I decide to change from a married-filing jointly filing to a married-filing separate filing, can I seek recalculation based on the new AGI, immediately. I just recertified, literally have not paid the first month based on my 2018 MFJ return, but now my 2019 MFS return has a significantly lower AGI.
Yes you should be able to recertify
Hi Travis,
Question on this. I am married have two kids and file jointly with my wife. We are both currently on IBR. I have 45K in SL debt, she has 55k. Our AGI is usually around $65,000 a year. However, this year we killed a retirement fund(with penalty and paid the tax penalty) to pay off our entire credit card debt. (I know not the best idea, but had to do it). That made our AGI for this years tax return (2019 filing) around $112,000.00. We are worried that next year when we recertify on IBR that our payments will go up way more than we can afford. Can we claim a significant change in income next year and then provide pay studs, etc to prove it to get a back to the payment amount we are use to? Our AGI will be around $65,000 again for the 2020 filing. We just had that 1 year spike due to taking this distribution to pay off other debt.
Yeah you can probably claim alternative documentation of income and use paystubs
Does this mean that was always the intent of the question? I filled out by form in March 2018 after finishing my graduate degree and starting full time employment. It was still the old wording at the time. Since the examples were all about decreases in income, I interpreted it as only being about having lower income. So, I said “no” and the IRS Retriever used my most recent tax return (Tax Year 2016 since I hadn’t yet filed my 2017 taxes).
Under the new wording, it seems clear that is what I should do if I was filing my application in 2020. Do we have any indication that is what was previously meant as well and that what I did was correct? Or does this only clarify moving forward?
Yes it’s likely what they always meant
1. If my taxes aren’t filed online at the IRS yet (had to mail due to $0 income), when I click “no, my income hasn’t decreased” it says I will have to upload a tax return. Is this the right method to go about things? One loan officer said to click yes, but now I’m not sure if that’s correct.
2. There is a question that asks if I work for a nonprofit organization – I start in June so should I click yes or no? I’m not sure if this affects my processing if I want to go the PSLF route (already indicated this on another question).
Thanks in advance!
Click yes you work at a non profit and if you answer yes theyll ask for paystubs so its your call
Hello,
I am in the process of recertifying my IDR. In a week I will start a new job with a salary increase. My wife (previously unemployed) at the beginning of the year got a job. So our household salary increased. I am using my 2019 tax return. We filled jointly. At the end of my application it says “has your salary income significantly changed? No.” Should I just leave it like that or do I need to inform them about my wife salary and my new job?
It depends on whether your income change is “significant,” which isn’t helpful because the term is so ambiguous. If you’re recertifying now and haven’t yet started your job with an increase in salary, leaving it as “no” is your best bet. Next year, your 2020 tax return will reflect the changes and your payment will likely increase.
Hello,
I have an IBR plan and am already capped at the Standard rate. However, I still recertify every year in order to keep my IBR plan. I recently married and we live in California. Our earnings are now combined on our tax returns as per California law, and my husband and I will both be capped at the highest rate for our IBR plans. We do not wish to share our tax returns with our loan providers. The risk is that although we file married-separate, our loan service providers might still combine us together on a different plan if they have all our information from our tax returns. We do not want to lose our separate IBR plans. As alternative proof of income, instead of uploading 24 paystubs of biweekly earnings, may I upload my W-2 from last year instead?
California is a community property state so your spouse’s income will likely still be counted. They may not require a full year of pay stubs, just estimate based on the most recent.
Hello,
My student loans will go into repayment in the next few months, and I am planning to apply for income based repayment (likely REPAYE). My wife worked all last year (2019 tax return) and most of this year, but has now left her job. When I apply for REPAYE, in an effort to not include my wife’s pay from 2019 return, I will click the “my income has significant decreased” button. However, it requires me to answer “Does your spouse currently have taxable income” and the description of this question starts by describing taxable income as “all income you’re receiving this year…”.
Is this question asking if my wife is receiving income anytime in 2020, or just from the moment I file this application onward. And what will they use as our AGI to calculate repayment? The projection of only my income for the next 12 months, or the estimated total household income of 2020, including her job which she has left…
Thanks!
If your wife left her job, you’d check “no’ for that question. They won’t use your AGI, they’ll use alternative documentation such as pay stubs.
Thanks for the great post, very in-depth and informative! Quick recap of my planned situation:
I’m an MS4 with four years of direct unsubsidized loans, graduating in May 2021. Based on my readings, I plan to apply for a federal direct consolidation loan immediately after graduation and put myself on REPAYE, initially certifying income with my 2020 taxes filed in April 2021. Since I had minimal income as full-time student in 2020, this should hopefully give me a $0 monthly repayment and nice 50% cut on my effective interest rate with the REPAYE subsidy. I should start residency in July 2021, which would then require an IDR recertification before May 2022 (is it 1 year after you apply for a consolidation loan, or one year after the consolidation loan is finalized and you are officially put into REPAYE?). I will earn half of my PGY1 salary from July 1, 2021-December 31, 2021. If I recertify “early”, say in March 2022, before my 2021 taxes are due, would that be relying upon the 2020 tax form filed April 2021? Based on what I read on the form, if your income has not “decreased” according to the new language, they will pull your latest IRS tax forms (for a March 2022 recertification, my 2020 taxes from April 2021), rather than asking for pay stubs. Could this guarantee that both my PGY1 and PGY2 monthly payment is $0, with the full 50% interest subsidy (and halved interest rate)? Or is this similar to the potentially shady “asking for tax day deferment” mentioned above and may or may not bring up potential issues? I plan to have the first year set to $0 payments with the 50% REPAYE subsidy (and maybe the second year depending on the answer to this question!), and then consolidate, as the private refinance rates are very attractive now in the world of COVID-19.
Finally, if you do end up having to certify with pay stubs, how do they calculate your full salary based on one pay stub? Multiply it by 26 and assume a biweekly pay schedule to get an estimate of your AGI? Or if I don’t do this “March 2022” trick and use the same 2020 tax return for two years of recertification, would they take my 2021 taxes (filed April 2022) and double my earnings from July-December 2021 from the first half of PGY1 to determine my income and estimate a full year AGI, rather than just the half year? Thanks so much for the help!
Sounds like you have a good grasp on your student loan situation. Those are excellent questions. Generally, when you recertify, they’ll pull your latest tax form. If you use alternative documentation like pay stubs, they have an algorithm to estimate your AGI and they use that to estimate your payments. Your strategy depends on several factors, so I can’t really say for sure if one way is better than another – I recommend reaching out to one of our student loan planners to set up an appointment to get in-depth advice on your repayment options.
I am in year 7 of PSLF program. This year I took out around 100K from my 403b to pay down debt, most of it 403b loans. I knew I would have 3 years to pay the taxes. But now I’m worried about not being able to afford the higher student loan amount. Currently I have to pay 15% of my AGI. Can I use my paystubs to prove it was a one time distribution?
Yes, you can use pay stubs as alternative documentation.