Hi Friendos,
Today I am tackling a topic that lives up to this newsletter’s “boring” moniker: recordkeeping. If you have federal student loans and are on income-driven repayment, please read this TODAY before the new administration takes office.
First, a personal anecdote that illustrates the importance of good recordkeeping. A couple months ago my spouse went through open enrollment for benefits at his job. One thing he selected was to max out his 2025 FSA contribution at $3,300. We knew we’d have at least that much in unreimbursed qualified medical expenses in 2025 and wanted to take advantage of the FSA tax benefit. After factoring in federal, state, and local income taxes, that benefit is worth over $1,000 to us.
I kicked things off earlier this month with a much-needed pair of new eyeglasses. When I went to pay for them with the FSA debit card, the transaction was declined! I called the FSA administrator on the spot and they said my spouse was not enrolled for 2025. What??? I was sure he’d opted for FSA contributions – I was sitting right next to him when he made the selections from his laptop.
After I got home I checked my records, and my spouse had sent me a pdf he printed while he was going through the open enrollment process online. The pdf showed each of his selections for insurance, the FSA, and so on, and right there I could see his selection to make FSA contributions every paycheck. Phew! I was SO relieved we had not screwed that up and lost such a valuable benefit. We did have an administrative problem to work through with his HR department, but we didn’t have to worry that someone might claim he never opted for the FSA; it was totally clear that the mess up was somewhere on the back end. Having saved a copy for our records completely took away the anxiety I would have otherwise felt.
Administrative mess ups happen in life. Employers occasionally fail to send W-2’s on time, but if you have your last paystub of the year, you can use that to prepare your tax return. Mortgage servicers sometimes misapply a payment to interest instead of principal paydown as you had directed; they will sort it out more easily if you have proof on your end of the payment type you directed. Don’t rely on others to keep copies of things for you: save a copy to your own records. It’s very boring but if you do it as you go along it doesn’t take too much extra time and could really save your butt down the road.
Now, on to federal student loans. I learned from the Debt Collective that the Department of Education just finished, two days ago, its review of income-driven repayment counts for millions of borrowers. Knowing your exact number of on-time qualifying payments is critical for possible loan forgiveness. The Dept. of Ed, under the Biden administration, was doing this review because prior to 2021, only 32 borrowers had ever received loan forgiveness under income-driven repayment plans. This was due to awful behavior from student loan servicers (looking at you Navient and co) and failures of the Dept. of Education to properly regulate and administer these programs, among other factors.
If you have federal student loans and are on income-driven repayment, you need to keep your own records of your payments! We know the loan servicers are not to be trusted. And, well I’ll just quote the Debt Collective here:
“We don’t know how long this information will be available or whether Trump’s Dept of Ed will just delete everything to screw debtors so it’s important to document it now.
This documentation is essential, and the only way to get it is to log into studentaid.gov and either “print as a PDF” or take a screenshot of your count totals. Keep that documentation safe in your files. They could be the only documentation you have of how much progress you have made towards cancellation, and you might need this documentation to be able to fight and force the Dept of Ed to discharge your loans eventually.”
The Debt Collective provides some specific advice of what to document and shows helpful screenshots – I provide a copy below. If this applies to you, please take a look and do this TODAY.
-Stephanie
Frequently Taxed Questions 