Navigating student loan debt can be a significant challenge for borrowers. For those with federal student loans, income-driven repayment (IDR) plans are a great way for borrowers to make their student loan payments more manageable. Income-driven repayment plans adjust your monthly loan payments according to income, location, and family size. It’s important to note that if any of these factors change over time, it can change the amount you owe each month, depending on your plan.
When you qualify for an IDR plan, you’ll learn that it is essential to recertify each year to maintain your participation in the program. By staying informed about the impact your job status can have on your repayment plan, borrowers can take advantage of the benefits offered by IDR and remain enrolled in the program throughout any personal economic shifts that could occur over time.
Income Changes
Changes to your income can impact your eligibility for certain income-driven repayment plans. An increase in income may require an adjustment to your monthly payment to meet plan requirements. Conversely, a decrease in income may make you eligible for increased assistance with loan repayments. It is important to report any changes promptly to avoid missing out on the potential benefits available through IDR plans. Also, certain types of employment (such as seasonal or part-time work) may not be eligible for all IDR plans. Research your options thoroughly before deciding which plan is best for you.
Switching Jobs
Recertifying for an income-driven repayment plan is also necessary if you experience any changes in employment. The US Department of Education requires borrowers to recertify their income within 45 days of any job change to maintain eligibility. Similar to income changes with the same employer, a new job and new income may impact your monthly payments. This could lead to paying off your loan faster, so make sure you’re updating any job changes to stay on track for student loan forgiveness.
Switching Payment Plans
Several IDR plans are available, each offering varying monthly payment amounts and repayment periods. Depending on your current financial situation, a different plan may be better suited for you, and you may be able to switch while you’re enrolled in IDR. For example, if your income increases in a way that would make you ineligible for your current plan (because your adjusted payment amount would be too high), some plans will revert your monthly payment to the amount you would pay on the Standard Repayment Plan for federal loans—so that you’ll never pay more than the 10-year Standard plan would require each month. Income-Based Repayment (IBR) and Pay As You Earn (PAYE) are two plans.
However, if you’re enrolled in Income-Contingent Repayment (ICR) or Revised Pay As You Earn (REPAYE), an increased income may result in paying more per month than you would on the Standard Repayment Plan. It may be wise in those situations to speak to your servicer and switch your repayment plan, either to the Standard plan or a different IDR plan, if eligible.
Staying on Track
When managing your student loans, ensuring you remain eligible for an IDR plan is important to help you reach your goals over time. Changes to your job status or income level may cause changes in your monthly payment amount or potential loan forgiveness. Additionally, depending on your current financial situation, you may want to review and switch the type of IDR plan you’re on. Keeping track of changes in employment status and reporting them as soon as possible will ensure that you can continue making affordable payments as you progress in your career.
