Incomoe based repayments are for student loan borrowers who are short on cash or need an adjusted monthly payment to meet their monthly income, like some freelancers

Income-Based Repayment for Freelancers

I was a full-time employee when the pandemic started and my Federal loans went into forbearance. My loans are coming out of forbearance in May, along with everyone else. But since the original deadline was at the end of January, I was getting robot calls daily about my student loans. Mostly my loan service provider wants me to jump back on auto debiting my payments. I would like that too, except for one little thing– I’ve been a freelancer for most of this year. 

So, I don’t have a consistent income source, which can make income-based repayment (IBR) more complicated. I’ve read about how to approach income-based repayment for freelancers online. Honestly, I get halfway through the instructions and feel so overwhelmed that I shut my laptop and go play Animal Crossing. 

But this needs to get done, and I figure I’m not the only one in this situation, so let’s knock it out.

Income-Based Repayment for Freelancers

Why IBR
Private Loans vs. Federal Loans
Submit Your Tax Return From the Previous Year
Submit a Letter Verifying Your New Income
Call Your Loan Service Provider
Submit the Revised IBR Form

There is a lot of paperwork involved in some types of loans, but income based repayment, or IBR is relatively simple

Why IBR 

I use an income-based repayment plan because there is a chance that I won’t be able to pay for my student loans in full within the standard repayment window. This is because the monthly payments are too high for me to pay. I’ve never made enough to afford the full monthly payment of these loans. 

My goal is to increase my monthly earnings to address this. Without income-based repayment, my monthly payments would be around $800 a month. When I was just out of graduate school my payments were over $1000 a month, so I try to take advantage of any new options that can reduce my monthly payments.

Private Loans vs. Federal Loans 

My Federal loans are my biggest loans, but I also have private loan debt from grad school. If I’m having a hard time financially I have the option to put my private loans into forbearance. 

There’s a limit to how long I can keep those loans in forbearance. I think I used up most of my forbearance time during the Great Recession, so I just need to keep paying on my private loans no matter what my income is. That’s why it’s important to me to take advantage of other repayment options for my Federal loans.

Submit Your Tax Return From the Previous Year 

The simplest way for the government to calculate payments is to use my tax return from last year. 

To move forward with this option, I think I need to fill out the income-based repayment form and send it to my loan services provider. 

The business I worked for in 2020 cut employees to four days a week. I took a 20% pay cut because of the reduced hours. So, my 2020 tax return should be a good reflection of my current income. 

But it won’t be next year, because I worked full-time at a higher salary for the first half of 2021. Because of this, I also want to check out my other options.

Submit a Letter Verifying Your New Income 

Based on online research, it looks like my best alternative to sharing my tax return is submitting an income verification letter. It looks like I need to talk to my loan servicer to see what they want in this letter.

The issue with this letter is that income-driven repayment plan requests can be denied. It’s also a pain because a letter isn’t standardized like a form is, so it can also take longer to process.

Call Your Loan Service Provider 

I called my loan service provider and they made the same recommendation that I found online. The simplest way to update my payment amount for my income-based repayment plan is to submit my most recent tax return.

My other option is to submit a self-certified letter. I asked about denials. The person I spoke to explained that the reason these letters are sometimes denied is because of contradictory information. So, if I submit a self-certify letter I will keep it simple. I don’t plan to submit other information, like my tax return, that could contradict the information in my letter.

Submit the Revised IBR Form 

I consolidated my loans through the Federal government, so that’s where I complete my forms. The process of submitting the form online through studentloans.gov was much easier than it’s ever been before. The website is simpler and easier to read too.

Until recently, this form was a fillable PDF or a paper form that I needed to complete, scan, and then email. This time was different. Instead, the online form was quick and simple. 

I got a confirmation letter about eight minutes after I submitted the form online. I didn’t get a confirmation number when I submitted the form, so I thought I would just have to hope that they had everything they needed. But the email they sent included a link to view my application in case I need to double-check it.

Income-Based Repayment for Freelancers Final Thoughts

I’m glad that I called to talk to my loan service provider because I thought I needed to send the form to my loan servicer, not the government. I also got some helpful tips about how to submit the income verification letter in case I want to go that route in the future.

Now that I’ve submitted the form online, they’ll send the information directly to my loan service provider. Once I hear that they’ve approved it and I have a revised payment amount, I can update my auto-debit.

Going through this process while writing a blog made me a lot more patient than I usually am when making calls about my finances. I’ll probably share more posts like this in the future. Let me know if this is helpful for you too!

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Post by Jana Rumberger