IDR: Tips to getting the lowest minimum payment

[Anonymous]

It can be difficult to determine which plan is best for you. Maybe you're on the plan to temporarily lower your payments or maybe you're headed to the long road of 10/20/25 years to forgiveness. Whatever the case is, it can ease your finances to get the lowest minimum monthly payment (you can always pay more to bring down your interest or principal).

First step, if you haven't signed up for an IDR plan yet, you probably want the application to go through as quickly as possible. My recommendation is filling it out online and using the IRS upload feature, if possible. There may be other faster methods depending on your servicer. I've always found this helpful with FedLoan Servicing because they notify you when the application is processing, and when it's done (or rejected with an error. You'll get a letter with an explanation.) If you are on a plan and need immediate relief, this can also be helpful because you can be placed on an administrative forbearance for up to 60 days while it's processing. Interest will accrue, but you won't have to make any payments. Double-check that they have done this because....servicers.

Now you might ask, what happens if your wages significant increased after you turn in the application? Then celebrate (okay, probably not. These are student loans we're talking about). Yur payments are already locked in for the next 12 months. Be prepared next year for a possible increase in payments.
What if your wages are significantly lower though? That's okay. You'll want to do the IDR application again, this time driving it's for an early recalculation, applied as soon as it's processed . You see, on the letter where they tell you your monthly procpayment amount, there is small print that tells you that should your wages significantly change you can have your payments recalculated. Decrease only really... because it's not required to report an increase. Also keeping in mind they don't actually qualify what significant is so...$1?.
At that point you'll submit a copy of current (within the last 90 days) income such as timesheet, paystub etc. It needs to have your name, employers name, pay period, and amounts before and after taxes. You need to put the frequency of pay on this. I usually write it in red and circle it on the off, because again... Servicers. They will also accept the information in a letter from your employer. See the IDR application for an this info and more. I usually upload my application and timesheet directly to FedLoan Servicing. Some services accept emails too although SSN through email. Hmmmm...
When you get your new payment it will be good for a brand new 12 month period. If you get lower pay during the year, you can turn it in again. Or if you think your wages will be going up, recalculate before this using paystubs/ timesheets to lock in that lower payment for another 12 months.

Hope this was helpful and if you have any questions (or corrections), please reply.

[calyx]

Thanks for the write up @Anonymous !

I would add:   If you are on IDR, you can still make extra payments - it won't change anything.  So if you have a bump in pay or can afford more but don't want to commit to paying more every month (which makes your finances more flexible), you can totally do it. 

For example:  I have my regular payment set up through the system (for the .25% reduction), but have an additional amount recurring using my bank's bill pay.    If I have a windfall, I might send a one time payment as well.   In the end, I can turn off the billpay from the bank without any issues or changes to my regular payment.

[Knice86]

Offset income by investing more into a 401k/IRA/FSA plan.  The lower your AGI, the less you pay and more you have invested into retirement.  This usually only works well if you owe a lot of money on loans and plan on utilizing some type of forgiveness.

[calyx]

^ +1    You can also use that trick to continue/maximize getting your student loan interest deduction if you're over the income cut off.
2019 phase out starts at 70k and ends at 85k    

[bettiebrown251]

All good information! Thanks!

[Anonymous]

Any tips on when you don't have filed tax return to show AGI? I have a large disparity between my taxable income and total earnings. This particular servicer states that they are required to count my total earnings (tax free stipends for travel work) and not just my taxable income (which essentially would be my AGI based on dry runs filing my taxes) and then they will calculate my discretionary income from that. All the research I have done via the US Dept. Of Ed states "non-taxable income" for IBR. I am at a loss. Should I press them about this? Otherwise I doubt I will qualify. They are asking for 2018 which would be 36k taxable income and 112k total earning for the year. My W2 doesn't even display the stipends/non-taxable income (obviously, because it isn't calculated into your tax bill), but they want paystubs for proof. Could I maybe request submitting my W2 in lieu of the paystubs?

[Anonymous]

@Anonymous Yes, sorry. I got behind. I saw your post though. 

I should be able to more thoroughly answer you in the next day or so but it was my understanding you were trying to use just your paystubs. You can't do that because you need that AGI number. You mentioned not having filed but you're not looking at your paperwork for 2019, it's for 2018. The question would be are your wages, even inconsistent, about the same. If so, I'd go with this. 

If you use your paystubs you can also turn in an income and expenses form that is provided. This often gets people's expenses down even more. The problem would be that with the significant expenses that you're talking about I'm not sure how you'd provide proof or bills of gas,etc. 

I would strongly recommend you talk at length with the collection agency. They might not be initially forthcoming but they do have other options including a written letter from an employer(s). I don't know if that could include (work-related?) Expenses. 

I see no scenario in which you will have to pay on the $100k+. But it might just mean you need to file for 2018 ASAP in order to get a better AGI reporting.

[Anonymous]

Thank you for your response. I was speaking regarding my 2018 taxes. I was using 2018 tax form with my 2018 tax info, not 2019. 2019 is even more drastic, so I was pleased when they were originally asking for 2018. It is going to be near impossible to file 2018 because of many issues and I assume there is a time frame to complete this step. I do keep receipts for *everything*, but lets say they aren't a very well orginized drawer of receipts consisting of 4 years. But it is in layers, right? Haha! They definitely did ask for paystubs, though, in lieu of the tax return, so I was wondering if I could somehow sub my W2. And this is in regards to rehab situation, but it sounded to me the same rules for discretionary funds as they went over it as with IBR. By the time I complete rehab, I may be in a better situation with filing my taxes. Thanks again, I will call them up tomorrow and see my options. They took me up the chain several last time saying final call with their response, but I am sure they are eager for resolution nonetheless.