A large percentage of federal student loan borrowers are currently enrolled in an income-driven repayment plan. Unfortunately for these borrowers, the annual re-certification process just got more complicated. In the past borrowers just went to the Federal Student Aid’s Website for Income Driven Repayment Requests. The form was fairly simple, and using the Student Aid website, borrowers could easily import their latest tax return information and the process would be complete.
Last month we learned that the IRS data retrieval tool was down. Apparently, it was vulnerable to hacking to collect taxpayer information. Last week we learned the data retrieval tool will be down for an extended period of time. It sounds like it could be down for close to a year.
Upon reading this information, I decided it was time to complete my yearly income certification. My deadline isn’t for another 60 days, but given the issues with the current process and the high cost of missing the deadline, I opted to get it done as soon as possible.
The New Process
The first step is still a visit to the Student Aid Website. For the many shortcomings in this process, the application form is still simple and easy to complete. As usual, when you sign up, make sure you are enrolled in the right income-driven repayment plan.
Things get complicated when it comes time to document income. Because the IRS data retrieval tool is down, the Student Aid website jumps ahead and informs you that because you failed at the IRS data retrieval, you will have to submit paper documentation. That isn’t really what is happening, but don’t be surprised to see the strange language.
Instead, you will have to submit your most recent tax return. It just gets attached to the back of your application and mailed in to your loan servicer or servicers. (If you have multiple servicers you will need multiple copies of everything.) If you are in a pinch and cannot find a copy of your most recent tax return, you can use the IRS website to get a copy of your transcript. If your tax return does not adequately reflect your income, you can submit your most recent paystubs.
Once everything is completed and signed, it all gets mailed out to your servicer(s).
This temporary system will add extra time to an already ridiculously slow process. It would not be surprising if it took several months for the new payments to get certified. The electronic process was terribly slow, but now with everything being done by paper, it will take even longer.
Waiting until the IRS data retrieval tool is back up would be a giant mistake. The Department of Education has made it clear that it will be down for a while, and if you miss a certification deadline, any unpaid interest will be capitalized, which makes it an expensive mistake.
Watching the Process
The new paper driven system will be even more likely to result in errors than the previous system. Be sure to document every step and keep detailed records. You will know something is wrong if you get a monthly payment that is far different than what you payment should be according to the Federal Repayment Estimator. If you have not heard anything from your lender for several weeks regarding your application, it is probably time to give them a call.
The certification is complete once you get a letter in the mail stating what you new payment will be and when it starts.
Hopefully by the end of 2017 the IRS Data Retrieval Tool will be back up and running.