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IDR: Tips to getting the lowest minimum payment

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Valued Contributor

IDR: Tips to getting the lowest minimum payment

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.



4 REPLIES 4
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Senior Contributor

Re: IDR: Tips to getting the lowest minimum payment

Thanks for the write up @Sabii !

 

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.


EQ: 792 | EX: 785 | TU: 781 | Accounts: 2/6 5/12 10/24
Happy practitioner of AZE6or7or8
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Established Member

Re: IDR: Tips to getting the lowest minimum payment

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.

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Senior Contributor

Re: IDR: Tips to getting the lowest minimum payment

^ +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    


EQ: 792 | EX: 785 | TU: 781 | Accounts: 2/6 5/12 10/24
Happy practitioner of AZE6or7or8
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New Member

Re: IDR: Tips to getting the lowest minimum payment

All good information! Thanks!
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