What does “Student Loan Emergency Forbearance” mean?

When Congress passed the CARES Act in March of 20a20, it placed a number of student debt elements on hold. Besides halting monthly payments, it froze interest rates at 0% and said that borrowers on income-driven repayment (IDR) plans didn’t need to recertify their income.

The first two items made national headlines; if you search for “student loan news,” the media has been covering the payment and interest moratorium since last year. What you’ve probably heard about less–if at all!–is that income recertifications have also been extended.

How does the income recertification extension affect me?

If you have student loans and are on an IDR plan, you can likely benefit from the extension. Studentaid.gov says,

“You will not have to recertify your income before the end of the COVID-19 emergency relief period, regardless of whether your recertification date would have happened prior to the end of the relief period. As part of the payment suspension, your recertification date has been pushed out from your original recertification date. You will be notified of your new recertification date before it is time to recertify.”

What does that really mean and how does it impact you? You do not need to recertify during the emergency forbearance.

If you haven’t done so (your last recertification was prior to the pandemic), your new recertification date will be 20 months from your original (see chart below).

If you did recertify in the last year, you can either choose to continue on the annual (12 month) recertification schedule, or you can have it be 20 months after your most recent date. In either case–assuming that your income is increasing–this extension lets you keep a little extra money in your pockets!

Delaying recertification = a nice bonus!

Recently we got a call from Dr. Danielle and helped save her over $20,000. She finished her residency and finally got her dream job as a family medicine physician in 2019. That meant that she saw a BIG boost in her income and the ensuing bump on her 2020 taxes.

When the CARES Act was passed, she appreciated not having to make any student loan payments–especially since they still counted towards PSLF!–and she never got a reminder for her annual recertification.

When she was getting ready to file her 2020 taxes, she gave us a call to make sure she was still on track with her student loan plan and she asked us a question we hear a lot, “Once I’m done with my taxes, should I go ahead and recertify my income?” We said, “hold the phone!” You never need to recertify before your recertification date. Dr. Danielle didn’t hear about the moratorium on income recertifications (thanks news media…) so thought it must be coming up.

Actually, she doesn’t have to recertify until August 2022, which means she’ll still be paying just $300 based on her 2018 taxes once loan payments resume in October. She’ll be paying based on her resident’s salary in 2018, rather than her attending’s salary, which would cost her $1,500 a month: talk about major savings!