IBR repayment based on gross income, not AGI

[Junebug]

I was surprised to discover that my IBR repayment was calculated by Direct Loans Servicing (DLS) based on the gross income amount on pay stubs I submitted.

In January, I submitted my IBR repayment application along with the 'Alternative Documentation of Income' form and 2 recent pay stubs. Turns out, DLS relied on the gross income amount on the stubs, not the net pay amount. My gross pay is, obviously, much larger than my AGI would ever be. When I asked them about this, they simply stated that gross pay on pay stubs was what they relied on to calculate IBR repayment. I was given the option to submit the form again but this time with a 'self-certifying' letter stating my actual or anticipated AGI.

So, I am now wondering whether I erred in providing the alternative documentation. Given that it's January 2009, would they have merely relied on my 2008 fed tax forms? Does anyone else find this odd? Has anyone else had this experience?

[sararose]

i ran into a similar issue earlier in the month. i was finally given my monthly repayment amount for IBR, and it was also based on my gross income, as opposed to my AGI. i had sent 5 paystubs documenting my income, which were apparently ignored.

i got on the phone and after being informed several times that the IBR is based on your gross income for my first year of repayment, i finally insisted on speaking to a supervisor. the person i had been speaking with put me on hold for a few minutes, came back and told me they'd change it so it was based on my AGI instead.
it took about a week and a half for the change to be reflected online, and i'm very happy to say it's now correct.

just to be clear, though- i was under the very erroneous impression that my AGI = my net income in my paycheck. VERY wrong. your AGI is your income BEFORE taxes are taken out, not after. my gross income is higher than my AGI because of other deductions, like my retirement plan-- so i'm saving about $160 a month now having my payments based on my AGI... but not $300 a month, as i had originally thought.

i don't think you erred on providing them with your alternative documentation of income, i'm pretty sure that's required at this point for your first year of IBR. also, they somehow had my income for the year without my paychecks, from the IRS- maybe your employer already submits that information to the IRS and that's what they're basing the gross income amount off of. anyway, it's annoying, but definitely call and insist on speaking with someone higher up, it usually helps!

[hawkarma]

I've been very disappointed in Direct Loan Servicing for the way they've implemented income based repayment (IBR). I signed up for IBR the moment it became available in July 2009. Ever since then, I've been calling them monthly in an effort to convince them to make my payments reflect my adjusted gross income (AGI) as opposed to my gross income (the difference of which constitutes an extra $200 in student loan payments each month!)

Like sararose said above, they've recently begun to make adjustments based on requests by phone. But what they won't tell you is that such an adjustment is technically a forbearance-agreed payment until they receive your individual tax information and is therefore NOT an IBR payment.

If you're like me, you're eying loan forgiveness after 120 qualifying payments under IBR, ICR or the standard 10-year repayment plan. The adjustment they'll grant you by calling won't count toward your 120 qualifying payments. So think carefully if you're considering this option.

I chose to remain making my IBR payments based on my gross income, which DLS knows via the Alternative Documentation of Income Form I submitted for purposes of income contingent repayment (ICR) (which was my repayment method prior to IBR). They've told me that my tax information was requested on November 2, 2009, and that they would receive it in 12 to 15 weeks. They claim (I'm not sure if I believe them) that once they receive my 2008 tax information I will see my payments adjusted. As of February 11, 2010, (14+ weeks later), I have yet to see any change.

Just my experience FWIW.

If you're reading this, and the exact same thing is happening to you, I strongly encourage you to call your lender and demand that your IBR payments reflect your AGI. If you use Direct Loan Servicing, the phone number to call is 1-800-848-0979.

One final point. The College Cost Reduction and Access Act, which created IBR, expressly states that AGI is part of the calculation formula. See 20 U.S.C. Sec. 1098e(a)(3)(B). In my view, the use of "other documentation of income satisfactory to the Secretary" (i.e. the Alternative Documentation of Income Form) to calculate payments in lieu of AGI applies exclusively to payments made under ICR and NOT IBR. See 20 U.S.C. Sec. 1087e(e)(3).

[CounselorX2]

Thanks for the info. I will call them on Monday. It was wondering how, if the law required them to use AGI as the starting point, how could they legally calculate the monthly repayment amount based on straight Gross? Having the regulation citation to provide them with should help a lot! Thanks.

[rosaparks]

That was awesome! Probably one of the more interesting reads in awhile.


Best Attorney

[Junebug]

So, as instructed by DLS, I sent in a self-certifying letter verifying my AGI in late March (I originally sent in income information via the alternative documentation process). You can imagine my surprise when I received a letter from them just this past weekend notifying me of an increased repayment amount, based on the prior alternative documentation information I told them did not accurately reflect my AGI.

I called today and was told that the self-certifying letter DLS told me to send in was insufficient proof of AGI. Instead, I was told that they would accept a 2008 federal income tax form. When I asked why this wasn't suggested to me before, the DLS supervisor I spoke to told me that they started accepting 2008 tax forms just this month. I also asked why DLS was not able to access my 2008 tax information (since I signed a release for that) and was told that they typically only access tax information once per year around October.

This is highly frustrating. I faxed my 2008 tax info today, but I could have done that ages ago. Also, I am utterly baffled to learn that they self-certifying letters DLS is instructing people to send in are insufficient. Seriously, what on earth is going on over there???

Anyone else have a similar experience? I'd love to know.

[hawkarma]

FINALLY!!

I finally managed to get an adjustment in my payment. A decrease of $73.47. I received a phone call from Missy, a supervisor with DLS, telling me that my payments were now based on my 2009 AGI. I guess I'm happy I achieved a small victory. Though on closer inspection, even this amount is overcharging me by $29.03 according to the formula. So I'll have to call back.

I have to say. Direct Loan Servicing is the most incompetent agency I have ever dealt with. It's like they don't even know how to apply the IBR formula correctly.

If Direct Loan Servicing is ripping YOU off under IBR, call them at 1-800-848-0979 and DEMAND that they base your payments on your AGI. They're evidently not getting the message clearly.

I've been fighting this battle for since July 2009. I've sent letters. I've faxed forms and tax returns. I've called at least a dozen times. And I've spent literally hours on the phone trying to get through to these people. They have lied to me. Given me the run-around. And only now have I achieved a measure of progress.

Totally frustrating experience to say the least...