How Long Does it Take to Switch My Student Loan Payments From Standard to Income Contingent?

One way to reduce the monthly payment on your student loans is to switch to a different repayment plan. The income contingent repayment plan usually caps your monthly payments at 20 percent of your discretionary income, based on last year's tax return. If your family is close to the poverty level, you will have little discretionary income and very low payments. However, the process of switching repayment plans is not instant.

Timeframe

Most loan servicing companies will take less than two months to switch you from a standard repayment plan to ICR, although the exact length of time will vary depending on the company. The reason the process can take so long is because ICR requires proof of income to calculate the monthly payments. You will need to send in forms for the lender to process manually and calculate your payment. Depending on how close you are to your due date when you submit your application, you could have to make up to two more regular payments before your payments under ICR begin.

Expediting the Process

Your lender needs to have a copy of your most recent tax return to calculate your payment amount under ICR. The process will likely go faster if you can provide a signed copy of your tax return with your application for the repayment plan. For example, Sallie Mae takes seven to 10 days to process an application with a signed tax return, but up to 30 days to process an application without a tax return.

Making Payments

Make your regularly scheduled standard payments until you receive notification from the lender that your payment amount has changed. If you have a Direct Loan serviced by the Department of Education, your initial payment amount under ICR will be the accrued interest for the month. The payment will adjust after the Department of Education processes your tax return to calculate the payment based on your income. If you cannot afford payments while you wait for the payment plan to switch, apply for a forbearance. However, this might take almost as long to go through as your repayment plan application.

Tips

The sooner you apply for ICR, the sooner your monthly payments will decrease. If you anticipate that you will not be able to afford standard repayments, put in an application for ICR right away. When you apply during the grace period on your loans, you might be able to complete the switch before your first payment is even due. If a standard payment is due and you cannot afford it, call your lender and explain the situation to see if the lender can help you delay the payment without damaging your credit score or incurring late fees.