Every borrower in an income-based repayment program must file proof of income to continue participation. The student loan program payment amount is calculated based on a number of factors including their disposable income. Borrowers are required to submit documentation to their loan servicer annually or as changes occur. The loan service adjusts the loan based on changes submitted. Failure to submit timely documentation within the annual renewal period will result in the payment reverting back to the standard 10 year term.
Obviously this can be a significant problem for a borrower who may have been accustomed to a much lower payment. If this occurs, the borrower will have to reapply for an income-based repayment program and submit the required documentation.
Financial advisors added value services
Setting up annual reviews is fairly common for financial planners and tax service providers. For those who have student loans, it's important to make this a time where the status of their loans should be reviewed.
Advisors would be strengthening the relationship by setting aside additional reviews during the year as some borrowers make changes that are relevant to how the payments are calculated and the applicability of the repayment plan.
This is an opportunity for advisors to review and update the full scope of financial planning.
Through the CSLP program, financial professionals can gain deeper insight into how student loan repayment planning affects a client's overall financial plan and what do to in service to their goals.
Review the CSLP program course modules here.