Student Loan Borrowers: A Little Known CARES Act Provision Could Save You Money

There are about 45 million borrowers who owe nearly $1.6 billion in student loans in the United States. If you’re somebody who is repaying student loans, you are likely familiar with benefits from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). For example, the legislation froze interest rates at 0% for Federal student loan borrowers for six months. In addition, payments were suspended for six months through September 30, 2020. Amazingly, the payments also count toward Income-Driven Repayment (IDR) forgiveness and those enrolled in the Public Student Loan Forgiveness (PSLF) program. If you have student loan payments, you’re likely already aware of this.

But in the last few weeks, I learned about another CARES Act provision that may help you save money. If you currently pay your loans through an IDR, you are likely aware of the recertification requirement for annual income. Each year, borrowers are required to submit updated income information, which the loan servicer uses to calculate your monthly payment. If you don’t submit an income decertification, the loan defaults to a traditional pay plan. Because of that, the monthly payment will increase.

But I confirmed yesterday that there is a six-month extension for IDR recertification dates for some borrowers.

Recertification Extension Date

A few weeks ago, I logged into my loan servicer’s portal, and it said it was time to submit my recertification. Before doing so, I wanted to do some research about whether it was still required during the period of forbearance included in the CARES Act. I decided to dig around online and found an FAQ on the Federal Student Aid website. Here’s what it says:

NEW: My Income-Driven Repayment (IDR) recertification date is coming up soon. Will the administrative forbearance affect when I should recertify?

Yes. You will not have to recertify your income before Sept. 30, 2020, regardless of whether your recertification date would have happened prior to Sept. 30, 2020. As part of the administrative forbearance, your recertification date has been pushed out six months from your original recertification date. You will be notified of your new recertification date before it is time to recertify.

After seeing this, I decided to call my loan servicer, since the website said I had to submit my recertification. I spoke with a customer service agent who said I did not have to recertify, but she said she couldn’t say when it would be updated on the website.

A Letter Requiring Recertification

I thought I was all set, but then I received a letter earlier this week saying I had to submit my recertification by July. The letter said if I did not submit the information by the end of July, my payment would defer to the higher, traditional payment plan rate.

Since I already read the guidance from the Federal Government, I called my servicer again. I reached a customer service agent who said there is no six-month extension and that I was required to submit the recertification. Of course, I referenced the above paragraph to the customer service agent, and he told me to give him a minute.

Sure enough, he found guidance that he just received that week that highlighted the policy outlined on the Federal Student Aid website. He said he had not heard this. In addition, he said I was the first person to call asking about this.

Why You Shouldn’t Recertify

If you are eligible for this six-month extension, there is a chance it can save you money. If your income increased since your last certification, you might not want to recertify. This policy essentially gives extra months with your current payment.

For me, my new recertification date is now January 2021 instead of July 2020. That means my payment amount won’t change until March 2021. Normally, the new payment begins for me in September 2020 (it would be October this year since the CARES Act forbearance period includes September).

In my personal experience, my loan servicer does not seem to be taking steps to notify borrowers of this benefit. I asked if I would receive a letter that included this information, but the customer representative didn’t know. I don’t blame him for that, but this policy has been on the Federal Student Aid website for nearly a month now. If you’re servicer is demanding you to recertify, consider this guidance and give them a call. If your period of recertification is before September 30, 2020, you are likely eligible for the six-month extension.

Bottom Line

A little known and underreported provision in the CARES Act offers a six-month extension for IDR recertification requirements. If your income increased since your last certification, deferring income certification could save you money over the six-month period. While this isn’t travel related, there is so little written about this that I thought it was important to get out there.

This article is not meant to provide legal or financial advice. Please contact your student loan servicer to see if you are eligible for this recertification extension.

Photo by Pepi Stojanovski on Unsplash