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Recertification: Tips & Tricks to Maximize Forgiveness

What Re-certification Means

Once you’ve selected an Income-Based Repayment (IBR) plan as part of your strategy towards loan forgiveness, you will be required to recertify your income every year.  As part of this process, the Department of Education will review your application and supporting documentation to recalculate your student loan payment.  This has to be done to prevent the loan payment defaulting back to the standard repayment amount after your initial period.  You’re essentially certifying that your income and household size are at a certain level and requesting that your loan payment be adjusted based on that.  For the Public Service Loan Forgiveness (PSLF) Program you have to be on an IBR plan while payments are made to qualify.  This payment can be substantially less if you’re income is low enough.  This becomes less advantageous with higher income levels.

Being Cheap

When you recertify your income and household size, you have some options in how you verify your income.  Many people provide their tax return, as this is the simplest and easiest to do.  You have other options to document your income.  One option is to use your paystub.  If you receive an end of the year bonus that’s not guaranteed, you could submit your October or November paystub before the bonus is paid out.  If you’re self-employed a second option would be to draft a letter outlining the average income you have due to potential fluctuations in your income streams as you get and finish jobs.  You are not required to use any specific method; you are just required to be able to document what you expect to be a reasonable estimate of your income.  In many cases, you are free to provide any information you feel best describes what you are expecting to make during the next period.  Consider your options and choose the one that works best for you.

Checking In with DoE

One of the main hitches that people have run into with the PSLF program is qualifying payments.  You must make 120 qualifying payments while employed at a qualifying employer.  To help with this becomes the Department of Education allows you to Pre-Certify your employer.  You complete the form once a year and the DoE responds to let you know if you are receiving creditable time with your current employer.  This is a very important step in the process as it helps solidify your chances of obtaining timely forgiveness.  Many current borrowers have run into issues with their employer not meeting the criteria to grant them qualifying service.  This is a problem that would best be discovered in the first year as opposed to year eight, nine, or even ten.  With the loan forgiveness process, you have to make a lot of assumptions on the front end – that you work in a qualifying job, that your income will be low enough to make it worth it, and that none of this will change for ten years.  Ten years is a long time even by today’s standards returns.

It can be beneficial to work with a Certified Student Loan Professional (CSLP) to help address these issues.  The CSLA Board of Standards certifies these individuals.  These individuals have passed a rigorous exam testing their knowledge of the student loan repayment and forgiveness processes.  These individuals focus on the tools to solve this need not some financial product to try an end-run around the rules that may or may not work.

Are you ready to take the next step for your financial plan? Schedule a FREE consultation with me to learn how you can optimize your budget by clicking HERE.

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