Written By Travis Hornsby, CFA®, CFP®
On Friday, March 1, 2024, the Department of Education decided to abruptly delay recertification of Income Driven Repayment (IDR) for borrowers until “no earlier than late September 2024.”
For many borrowers, this could mean that you don't have to share information about your current income until mid to late 2025. Borrowers who were asked to recertify already might soon get relief and lower payments.
We’ll cover what this means for you depending on your IDR recertification date and what to expect with your student loan account.
Borrowers who were asked to recertify before March 1, 2024
Servicers like MOHELA appeared to ignore Department of Education guidance that no borrower would be asked to recertify their IDR payment before March 1, 2024.
Many borrowers recertified under duress, worried they would lose out on credit towards loan forgiveness programs.
In the IDR recertification delay announcement, it’s clear that if you recertified, your payment would be returned to what it was before you provided that new income information.
If you recertified and your payment went up, the Department of Education says, “We will return you to your previous monthly payment amount.”
The Department of Education
Borrowers with recertification dates between March 1 and September 30, 2024
Pretend you had an IDR recertification date of June 1, 2024. How does this announcement affect you?
Your new recertification date will get pushed out to June 2025.
Pretend you have a low $300 monthly payment, but you now earn far more than when you last used your tax returns to recertify.
Your $300 monthly IDR payment would last until June 2025 instead of needing to be reupped in June 2024.
Borrowers in this cadre should probably be the most excited of all. It could mean paying thousands of dollars or even tens of thousands of dollars less in IDR payments for the next 12 months.
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Borrowers with recertification dates between October 1, 2024 and February 28, 2025
Theoretically, if you’re in this group of borrowers, you’re unaffected.
However, the Department of Education said September 30, 2024, was the “earliest” a borrower would be asked to recertify.
Put yourselves in the shoes of the White House.
If you could put off the IDR recertification deadline one more time, say after the election, to avoid any borrowers having their payments increase, would you do that?
It seems far more likely than not that the Department of Ed will make this announcement sometime in late summer or early fall simply because they have no political reason not to.
Historically speaking, the Biden administration takes student loan actions that are financially beneficial for borrowers, unless Congress or the Supreme Court explicitly stops them.
New guidance on when and how servicers can ask for your income
In the Federal Student Aid announcement, the department states three dates you should know for IDR recertification:
- 3 months before: A servicer will reach out three months ahead of your IDR recertification date to ask for your income.
- 35 days before: A servicer needs to get your income info by this point, or your next bill could be inaccurate.
- 10 days before: If your servicer doesn’t receive your income, they’ll take you off your IDR plan and put you on something akin to the Standard Plan. Note that you can get back on an IDR plan by resubmitting income even afterwards
Related: To Link or Not to Link: Guide to IRS Automatic Income Sharing for Student Loans Repayments
Now we know why MOHELA was asking for IDR information so early
Why was MOHELA asking for IDR information months before borrowers needed to submit it?
In part, it’s because the Department of Education never publicized their guidance that servicers are supposed to reach out three months ahead of time to obtain income information.
The other reason is likely that MOHELA just went off on its own and wrongly asked for income info indiscriminately and early in many cases.
However, borrowers can expect to be asked for income information three months before their IDR anniversary date, and that information should not be used to increase their payment until that date, even if such information is provided early by the borrower.
Why did an IDR recertification delay happen?
This IDR recertification delay is welcome news for borrowers.
Department of Education likely had many resources moved over to fix the FAFSA mess, and in the absence of additional funding from Congress, they decided to simply hit the easy button and put off the large amount of work they needed to do to update borrowers’ IDR payments.
Next steps for borrowers on an IDR plan
You still need to pay attention to how you file your 2023 taxes, as it could still very much affect your payments the next time you recertify.
The key thing to know is this will take time to fix, but all borrowers should be positively impacted.
So take a deep breath while your servicer updates your account, and if you get to pay lower payments for longer, don’t spend it all in one place 😊.
If you need help navigating this confusing mess, we can assist if you need it.
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
My recertification date is March 27 . Should I reach out to MOHELA or do you think they are supposed to contact us. I feel as though they may just put me on standard plan if they don’t receive recertification. They are not easy to deal with.