Changing your IBR Payment Plan

Consumers with student loans should be aware of the potential impacts of changing payment plans. Consult with a knowledgable financial advisor to understand how the change will affect you.

Before submitting an Electronic Application to change your repayment plan, be certain you have considered the pros and cons of changing plans and are confident that you understand any trade-offs of switching.

The unpaid accrued interest trap

For example, switching repayment plans causes unpaid accrued interest to be added to the principal balance of the loan. Once interest is capitalized, it becomes principal and will itself generate additional interest. Capitalization upon switching repayment plans cannot be avoided.

Some borrowers will benefit from switching plans in spite of interest capitalization, but no one should decide to switch plans without first considering the consequences of capitalization.

If You Use the Electronic Application, You Must Also Use the IRS Data Retrieval Tool.

Submitting the application and income documentation

Borrowers choosing an Income-Driven Repayment (IDR) Plan must supply documentation of income. If you use the electronic IDR application, the IRS Data Retrieval Tool will import your Adjusted Gross Income (AGI) figure from your most recently filed federal tax return.

Adjusted Gross Income High?

If the AGI from your most recent tax return is higher than your current income, you may be better off using a paper application instead so that you can submit alternative documentation of income. An Electronic Application to change your repayment plan may be used only if you intend to electronically document your income using the IRS Data Retrieval Tool.

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Heather Jarvis, JD

Written by Heather Jarvis, JD

Heather Jarvis is an attorney and a nationally recognized expert specializing in student loan law.  She has provided award-winning student loan education and consultation for universities, associations and professional advisors and is sought after for her sophisticated knowledge and accessible teaching style. Widely recognized as an expert source of information, Heather has advised congressional committee members and administrative officials on issues affecting student loan borrowers since 2005.  Heather graduated cum laude from Duke University School of Law in 1998.

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