Check Your IBR Payment, It May Be Too High
Some Income-Based Repayment (IBR) Payments Calculated
Find out if you are affected and how to fix it
We want to let you know about a problem that affects at least some borrowers with Direct Loans in IBR, and possibly others. In some cases -- how many remains unclear -- the current contractor for Direct Loan Servicing has incorrectly based IBR payments on the borrower's gross income (total income) instead of his or her lower Adjusted Gross Income (AGI, or taxable income). As a result, these borrowers' monthly IBR payments are higher than they should be.
There was an article about the problem in last week's Forbes Magazine. IBRinfo subscribers played a critical role by documenting the problem in our recent survey.
The Department of Education has assured us that it's moving
quickly to fix this problem and help affected borrowers. Some of the specifics
are still being worked out, but here's
what you can do right now to:
1) figure out if you're paying too much; and
2) get your payment adjusted if it's wrong.
Please read all the way to the bottom.
What is the problem?
IBR payments are supposed to be based on your "Adjusted Gross Income" or AGI (a figure from your federal tax return) whenever possible. In some cases, the Direct Loan Servicing Center mistakenly based IBR payments on gross (or total) income, which is higher than AGI and results in a higher payment for affected borrowers. We don't yet know how widespread this problem is.
How can I tell if my IBR payment is based on my AGI or gross income?
Check the tax information you used when you applied for IBR and find your AGI. (For tax year 2008, AGI is line 37 of IRS form 1040; line 21 of form 1040A, and line 4 of form 1040EZ.) Plug your AGI into our IBR calculator. If the resulting estimated payment is significantly lower than your actual IBR payment, your lender might be incorrectly using gross income instead of AGI.
Is this only a problem for IBR payments on Direct Loans?
Not necessarily, but most of the cases we're aware of so far involve Direct Loan borrowers. If you're currently making IBR payments on one or more Direct Loans, you should definitely check that your payment is correct. If you're making IBR payments to other lenders or servicers, it makes sense to check those payments as well. Please let us know if you encounter this problem with any lender or servicer, so we can help put a stop to it.
I think my payment is too high because it's based on gross income, not AGI. What can I do about it?
If you have Direct Loans and you believe (or know) that your IBR payment is based on gross income rather than AGI, call 1-800-848-0979 to speak with someone who can fix the problem. All customer service representatives at the Direct Loan Servicing Center received notices last week and again this week that IBR payments should be based on AGI -- not gross income -- whenever possible. They should be able to recalculate your payment correctly. If you have this problem with another lender or servicer, contact them directly. Please also fill out this brief form to help us monitor the problem and how it's being addressed. Your feedback is critical to our ability to advocate for borrowers.
What about the amount I've overpaid already?
The Department of Education is in the process of determining how it will deal with past overpayments. Some possible approaches include applying the overpaid amount to the loan principal, to accrued interest, and/or to future payments. We'll continue to press for borrower-friendly solutions and keep our email subscribers informed as new information becomes available.
I haven't applied for
IBR yet, but I plan to. How can I make sure my payment is calculated correctly?
Include a copy of your tax return with your IBR application. Direct Loan customer service representatives have been instructed to ask you for a copy of your tax return -- which includes your AGI -- along with your other paperwork when you first apply for IBR. Many Direct Loan borrowers are also required to submit a tax transcript request form and an "Alternative Documentation of Income" form. Submitting a copy of your tax return lets your servicer use your AGI from the start, instead of relying on gross income until the IRS provides a tax transcript with your AGI. See our list of major lenders for more information about how to apply for IBR.
What if I do not file a tax return, or my most recent AGI does not accurately reflect my current financial situation?
The "Alternative Documentation of Income" form is available for borrowers in these situations, which requests additional income-related information other than your tax returns. If your AGI is not available or appropriate, your IBR payment will be based on your gross income, minus any overtime and pre-tax deductions you can document.
We understand that this issue is confusing, and that it may be very significant for some borrowers. We are monitoring the situation closely and advocating on your behalf. To ensure a good resolution, we need affected borrowers to fill out this brief form so we can make your voices heard. Unfortunately we are not able to assist or advise borrowers individually. Please contact your lender or servicer directly and attempt to resolve the problem with them. If you are having trouble getting the help you need, contact the Federal Student Aid Ombudsman to report a complaint.
IBRinfo is not affiliated with the U.S. Department of Education and we are in no way responsible for the implementation of IBR or the federal student loan programs