Enrolling in an Income Based Repayment Plan for your student loans is a fairly easy task. Not only is IBR a great way to lower your monthly payments, but the program also offers benefits such as student loan forgiveness.
However, be advised that signing up for IBR is a little like updating your car registration when you move… It can be a little tedious or frustrating, the process varies slightly from person to person, and it probably should be a little easier than what it actually is. Even though the program isn’t perfect, it is a necessity for many, and it is something that anyone can do.
Step #1: Determine who services all of your federal loans.
Go to the National Student Loan Data System to pull up a list of all of your federal loans. This page will show all of the companies servicing your loans, and how much you owe. You will need all of this information in order to determine your monthly income based payment to each company (Don’t worry, you won’t be doing any complicated math on this one).
Step #2: Decide if Student Loan Consolidation is for you.
If you are going to consolidate your student loans, you can enroll in Income Based Repayment at the same time, so there really is no point in signing up until your consolidation is processed.
We have previously discussed consolidation in more detail, and it is important to fully understand the pros and cons of consolidation before you make this decision. If you decide to consolidate, just go to the federal student loan consolidation website, and you can also enroll in IBR when you file that paperwork.
Step #3: Contact your lender(s) to fill out the paperwork.
This is one step that will vary depending upon who your lender is. Some lenders make the process very easy and allow you to sign up on an electronic form. Others require physical documents and snail mail. If you are handwriting your form, make sure your writing is neat an legible as they process many of these each day and an error can really set you back.
If you have multiple lenders be sure they are aware of your other federal loans. This will limit how much they can require you to pay each month.
Step #4: Document your income.
As part of the form submission, you will be asked to document your income. Here again, some lenders have an e-form where you can authorize the IRS to share your tax records form the previous year and you are done. Others will require you to mail or fax your completed tax return. If your tax return does not adequately represent your income, you can submit two recent pay stubs or proof of unemployment.
Step #5: Wait patiently, but keep on your lenders.
Processing IBR applications can take over 3 months. As the program gets more popular, you can expect it to take even more time. As a result it is important to be patient.
However, the process is not without flaws, and as a result it is critical you continue to check in to verify that your lender(s) has the proper documents and that things are going according to schedule.
Step #6: Be sure to re-apply each year.
The IBR payments only last for one year. Each year you must again document your income and re-apply for IBR. The re-application is fairly easy, but you don’t want to wait until the last second. As this can also take months to review, plan on applying approximately 3 months before your IBR plan is set to expire. You don’t want your payments to go up and not be able to afford them.