Recertify your IDR plan today!

Tax time has come and gone. While some of us enjoyed our 0% interest savings account and got a big check back from the government for overpaying taxes, others maximized their paychecks throughout the year and received or paid back very little from/to the IRS, and some didn't plan very well and owed quite a bit. Either way your return went, the IRS now has your 2014 AGI. I had anticipated more time before needing to resubmit paperwork update our student loan income driven repayment (IDR) plan, considering all of the issues setting it up last year. I was mistaken.

I received an email on April 17th from StudentLoans.gov, approximately one year to the day after I submitted my original IDR plan request, to recertify our income. Failure to do so would result in our repayment defaulting to the standard repayment. Understand that no information of a deadline was included in the email, and rather than owe an additional $704 next month, I thought it might be better to update our AGI  than challenge the government on unclear deadlines when money owed is concerned.

Recertifying was easy. Our taxes were already complete, so updating our information was fairly straightforward. My address and marital situation hadn't changed so most of the information was pre-populated. All that was needed was to link up my request to the IRS to update my AGI, confirming family size, "reading" the disclosure, and signing. My spouse was present with her Dept of Ed PIN so we were able to have her co-sign on the spot. That was it for my loans. We had to logout and log in under her information and repeat the process to update her loans.

It seems that 2014 was a better year for us than 2013, our AGI went up about 11.7% which I suspected would translate to a 11.7% increase in our total student loan payment.

We used the calculator at the StudentLoans.gov website to estimate what our new payment would be. Last year, our total loan payments were about $222 ($144 for me, and $78 for my spouse). After updating our AGI from 2014, my estimated PAYE monthly payment increased by $37 to $181 and my spouse's estimated IBR monthly payment increased by $17 to $95. The net estimated monthly increase of $54 per month or $648 per year would be a 24% increase in our monthly student loan payment, or double my estimated percentage increase.

We are grateful the government created income driven repayment programs. Even an estimated repayment increase of $54 per month is $650 less than standard repayment. We did get 8 payments based on our 2013 income before needing to update our information. Only 112 payments left to go until my loans are forgiven.

PAYE and IBR Savings to date:
$704 * 8 = $5,632

Working on finding the sweet spot where our AGI makes our total IDR $208.33 per month or $2,500. That would optimize our student loan interest deduction and force us to save more pretax income for retirement...

PSLF Loan balances forgiven not taxable!

Public Service Forgiveness Loan Update

According to the Internal Revenue Service (IRS), student loan amounts forgiven under PSLF arenot considered income for tax purposes. For more information, you should check with the IRS or your tax advisor.

This certainly was welcome news for future me who was looking at a future additional tax bill of about $20,000 in federal and state taxes based on projected loan forgiveness amounts. Looks like I may not be all grey in 2024 after all.