IDR Recertification in 2021: Save No Matter What

Recertifying your IDR plan in 2021 will give you a lot of opportunities to pay less if you’re pursuing student loan forgiveness. The system was not designed to stop and start payments for millions, so expect confusion and a bit of chaos. 

That said, we know enough already to give you some great tips on how to pay less on your IDR payments in 2021 and 2022.  

Why Your IDR Student Loan Payments Will Likely Start in May 2021

From what we know currently, the bipartisan Congressional bill with the best chance of passing would extend the student loan payment and interest freeze from January 31, 2021 to April 30, 2021. Secretary DeVos already requested the extension for another month to the end of January, as the freeze originally expired on December 31.

If the student loan freeze ends April 30, that means the first IDR payment in 2021 would be due around May 30, 2021. We know that because borrowers have showed us that the first payment date in their NSLDS data files has consistently been about 30 days after the interest freeze expired. 

Congress desperately needs to pass something now for far bigger reasons than student loans. 

For example, the IRS ruled that PPP loan forgiveness for small businesses cannot be deducted against expenses. That would defeat the purpose of PPP and saddle small businesses with hundreds of billions in income taxes due in 2021 and 2022. Enhanced unemployment benefits and other economic relief also expire at the end of the year. 

So a stimulus of some kind is extremely likely, and student loans are very likely to be in it (otherwise Secretary DeVos would not have extended the interest freeze another month to give Congress more time to deliberate).

Why is Congress thinking about ending the freeze on April 30, 2021 in particular though? 

Why 2020 Tax Returns Could Lower IDR Payments for Millions

Many borrowers had lower incomes in 2020 than they did in 2019. 

IDR recertification is due no sooner than March 31, 2021. That means some borrowers will be using tax return data from 2019 even into 2022 IDR recertification. 

That would result in higher IDR payments for many, and Congress likely wants to make it easier for borrowers to submit proof that their income fell in 2020 if they wanted to get a lower IDR payment. 

What’s the easiest way to do that? Restart payments shortly after most everyone has filed their 2020 income tax returns, as most returns get filed by April every year. 

Late spring also seems to be the time when the government is preparing society for a “return to normalcy” with expected vaccine distribution reaching much of the population by then.

When is IDR Recertification Due in 2021?

If you look at the text on Nelnet, Great Lakes, and Navient, you’ll see the following (I looked for it on FedLoan but unsurprisingly couldn’t find it) :

IDR recertifications are now due on or after March 31, 2021. Income-driven repayment (IDR) annual recertification due dates occurring between March 13, 2020, and March 31, 2021, are all now due no sooner than March 31, 2021 […]

Example 1: If your IDR recertification was due on May 15, 2020, the new recertification date is May 15, 2021.

Example 2: If your next IDR recertification was originally scheduled to occur on February 15, 2021, it is now scheduled for February 15, 2022.”

The only way Navient would have the same language as Great Lakes and Nelnet would be if this guidance came from Department of Education.

IDR recertifications in 2021 that would have happened anytime before March 31, 2021 have one year added onto when it’s actually due. 

That’s huge news and means you might be waiting a while before your servicer asks you about your income.

How to Recalculate Your IDR Payment

That late recertification date allows borrowers to use income from 2019 far longer than usual, unless it’s advantageous to recertify your payment early to get a lower payment because you earned less in 2020. 

To apply for early IDR recertification in 2021, simply visit the StudentAid site and click on appropriate button for “Recalculate my monthly payment”

For many borrowers reading this, that tip will be the single most important piece of student loan advice you read anywhere for the next year.

How IDR Recertification Can Save You Money in 2021

First, figure out when your next IDR recertification date is. You can do this by contacting your loan servicer and asking, or by downloading your NSLDS file and looking in it, or by hiring Student Loan Planner to make a plan for your student loans.

When your payments resume after the payment and interest pause, which we think will be sometime in late spring, your IDR payment will be based on what you were paying before the pandemic. 

That payment will last until your IDR recertification due date, which is likely to be sometime in the second half of 2021 or 2022. 

How to Get Lower IDR Payments in 2021 if You Have Increasing Income

Pretend you were a resident physician for part of 2019. Your income that year reflected half a year as a resident and half a year as an attending physician. 

Your income on your 2019 tax return would therefore produce a much lower IDR payment than your salary at the end of 2019 would have. Therefore you choose to use tax returns to recertify IDR payments every year.

Now imagine your IDR recertification date is February 2021. Instead of recertifying then, you now have to recertify February 2022. 

You’re able to use your low 2019 taxable income now for more than a year to pay less and possibly get more forgiven with the Public Service Loan Forgiveness program. 

So if your income has been increasing, wait to give your servicer your IDR recertification until they ask for it. There’s no requirement to give it to them sooner.

How to Get Lower IDR Payments in 2021 if Your Have Decreasing Income

If your income dropped, you simply need to visit the Student Aid site I linked to above and click “recalculate your monthly IDR payment.”

You can do so now or when payments resume. It’s probably better to recalculate the payment now so that the new payment begins at the correct level.  

Many borrowers will fail to do this, and it will cost them millions of dollars collectively. 

If In Doubt on IDR Recertification, Wait Until Asked

If you’re unsure when to recertify your IDR in 2021, just wait until you’re asked to do so. 

Borrowers whose incomes went up in 2020 would cost themselves money by certifying sooner than they’re required to. 

Only borrowers whose income fell in 2020 compared to 2019 need to take a proactive approach to IDR recertification. 

If you lost some income in 2020, make sure to get your IDR payment recalculated as soon as possible. 

With Congress likely to begin payments shortly after April 2021, you should have your 2020 tax return as proof of income. 

Keep in mind that if your income change is even worse than what your 2020 tax return reflects, for example you were laid off in the middle of the year, then you can also show other proof of income to get an even lower monthly payment. 

It seems extremely likely that student loan payments will begin again in 2021, which means IDR recertification will begin anew in 2021. Be ready and have a strategy so you can either refinance to record low rates or pay as little as possible with the help of a team like ours.