Whether you have your taxes prepared by an accountant or do them yourself, tax time is a miserable experience. That being said, while you go through the hassle of taxes, it is a great opportunity to do some routine maintenance on your student loan plan. It is also a good time to give some thought to your other financial goals such as retirement.
If you are on one of the income driven federal repayment plans, such as IBR, PAYE, or REPAYE; now is a great time to make sure things are on track. Find out when you last verified your income and if necessary fill out the paperwork for your next year. You want to make certain that you do not miss a re-certification deadline, because it can be very expensive.
Even if it isn’t time to re-certify your income, your tax form will be what determines your future payments. Once you know your new AGI, visit the federal student loan repayment estimator to see what your new payments will be next time you re-certify. If your AGI dropped, you might want to immediately begin the re-certification process due to a change in circumstances. This can lower your monthly payments right away.
Check Interest Rates
Being able to deduct some of your student loan interest from your taxes is nice. What would be even better is if you had to spend less money each year on student loan interest.
If you are paying outrageous amounts of interest, now is a good time to visit the possibility of student loan refinancing. For certain federal student loan borrowers, this is a mistake, but others it is a great opportunity. Check out our page on student loan refinancing and consolidation to find a list of lenders as well as some tips for making your decision.
Public Service Loan Forgiveness Certification
We highly recommend you fill out the Public Service Verification Form each year at tax time. Technically, you are not required to do this on a yearly basis, but it is a great habit to get into.
The most important reason to certify your employment often is that you are also verifying that your loan servicer has not screwed anything up. Finding out that you are on the wrong repayment plan is awful… but finding out that you have been on the wrong repayment plan for years is devastating. Unfortunately, it is a common problem.
Submitting this paperwork will tell you exactly how many more months you have before you reach the magic 120 payments for forgiveness.
As you battle student loans, retirement seems like it is a million miles away. However, if you don’t give retirement some thought, you could be missing opportunities to make it a real possibility.
If you haven’t figured out your plan for retirement and how it fits with your student loan plan, be sure to check out our articles on prioritizing paying down debt vs. saving for retirement, and how taxes can affect your student loan planning and retirement.
This is the time of the year you are elbow deep in your finances. You have just made a detailed accounting of the previous year, and if you are smart, given some thought to the upcoming year. As a result, tax time is the ideal time to do some student loan planning.