April 15, 2022

How Marriage Can Affect IDR Payments

Repayment

Marriage can change many things, including student loan payments, especially for couples with one or both spouses enrolled in income-driven repayment plans.

Before saying "I do," it's important to discuss how you plan to tackle your student loans as a couple and to review your options.

How your Tax Filing Status Affects your Student Loans

When you get married, you'll have the option to file a joint return with your spouse or to file separately.

If you're on an Income-driven repayment plan, how you choose to file can affect your and your partner's monthly payments once you get married.

Under all four income-driven repayment plans, married borrowers who file a joint return will have their combined income used to calculate their monthly payments. For some borrowers, this can result in a significant payment increase, so it's important to talk to your partner and, if needed, to consult with a tax professional.

While married borrowers who file joint returns can't exclude their spouse's income from their payment calculation, married borrowers who file separately can do so under some income-driven plans.

Borrowers enrolled in PAYE, IBR, or ICR can exclude their spouse's income from their monthly payment calculation if they file a separate tax return. However, married borrowers enrolled in REPAYE will not be able to exclude their spouse's income regardless of

filing status.

While filing separately can sometimes help keep your monthly student loan payments low, it may not outweigh the benefits of filing a joint return, so it's essential to weigh your options carefully.

Luckily, if you're enrolled in a term-based plan like the Standard plan, your monthly payments won't be affected regardless of your marital or filing status.

How your Spouse's Student Debt Affects your Payments

Aside from your spouse's income, your spouse's federal student loan debt can also affect your payments month-to-month.

If you're married and file a joint return, your monthly payments will be prorated based on your share of your spouse's combined federal student loan debt.

Here's how it works:

Pretend that you owe $50,000 in federal student loan debt and your spouse owes $30,000 totaling $80,000 in federal student loans.

You make $30,000, and your spouse makes $70,000 for a combined income of $100,000 a year.

Now let's say after taking into account your family size, the federal poverty guidelines, and your payment plan, your total household monthly payment comes out to $630 a month.

Your monthly payment will be $393.75, while your spouse's monthly payment will be $236.25.

Despite making far less than your spouse, because your federal student loan debt accounts for a more significant portion of your total household debt (62.5%), your total monthly payment would be higher.

While this may not be a big deal if you and your spouse plan to tackle your student loan debt together, it's still something to discuss before marriage.

Conclusion

Marriage is a huge commitment and can change your life in several ways.

For borrowers enrolled in IDR plans, marriage can add an additional complication when it comes to repaying your student loans.

While not as exciting as planning a wedding, married borrowers should talk to their partners about how best to tackle their loans and, if needed, consult with a professional.

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