You tied the knot, but you still have one more item to address on your newlywed to-do list: student loan debt. The first thing you will want to do is find out the loan type, the loan balance, monthly payment, payment history, and the payment status of both of your loans. Next, discuss your student loan repayment plan. If you’re repaying under an income-driven repayment plan, your newly minted marriage status may cause your payment amount to change.
1
You have more than one way to repay.
You have several ways to repay your federal student loans. These strategies include
- traditional payment plans that base your monthly payment on how much you owe and how long you’ll be paying off your loans and
- income-driven repayment plans that base your monthly payment on how much money you make and your family size.
It’s important to crunch the numbers with your spouse when it comes to an income-driven repayment (IDR) plan, which we’ll get into a little later.
2
Your income tax filing status affects the amount you repay.
You can either file a joint income tax return with your spouse or file separately. Under most IDR plans, we will generally
- use your joint income if you and your spouse file a joint tax return,
- reduce your payments to account for your spouse’s student loan debt if you file taxes jointly, and
- use only your income if you file taxes separately from your spouse (except if you are in the REPAYE plan).
Regardless, you must recertify your income and family size each year to remain on an IDR plan.
This table shows the income we use to calculate payments based on each specific repayment plan and whether you’re married filing jointly or separately.
| Repayment Plan | Income Considered When Married Filing Jointly | Income Considered When Married Filing Separately |
|---|---|---|
| Revised Pay as You Earn | Joint Income | Joint Income |
| Pay As You Earn | Joint Income | Individual Income |
| Income-Based Repayment | Joint Income | Individual Income |
| Income-Contingent Repayment | Joint Income | Individual Income |
3
Under most IDR plans, we’ll reduce your payments to account for your spouse’s student loan debt if you file joint income taxes.
Generally, whenever we use joint income to calculate your payment amount, we consider your spouse’s federal student loan debt and prorate your payment based on your share of the combined federal student loan debt.
And for the record, your spouse will not need to repay their federal student loans under the same repayment plan as you.
Here are some examples.
Let’s say you file a joint income tax return with your spouse. You don’t have kids, and you live in the contiguous 48 states. Your combined adjusted gross income is $100,000.
Under the Pay As You Earn (PAYE) plan, payments are 10% of yourdiscretionary income. That works out to $604.46 per month.
| Pay As You Earn (PAYE) Plan Combined Income | |
|---|---|
| Combined Income | $100,000 |
| 2022 HHS Poverty Guidelines for Household of Two | $18,310 |
| 150% of the 2022 HHS Poverty Guidelines for Household of Two | $27,465 |
| Discretionary Income (Combined Income Minus 150% of the HHS Poverty Guidelines Amount) | $72,535 |
| 10% of Discretionary Income | $7,253.50 |
| Pay As You Earn Monthly Payment (10% of Discretionary Income Divided by 12) | $604.46 |
Now, let’s say that you owe $60,000 and your spouse owes $40,000 in federal student loans for a combined total debt of $100,000. Stated differently, you owe 60% and your spouse owes 40% of the combined federal student loan debt. Divide your PAYE monthly proportionally to get your prorated payment amount. In this case, 60% of $604.46 would give you a monthly payment of $362.68.
If your spouse independently applies for the PAYE plan (which they would have to do to enroll), your spouse will pay $241.78 per month. If your spouse chooses a different repayment plan, their payment may differ, but it will not affect your calculated payment of $362.68.
Now I hear you saying: “But what if my spouse doesn’t have federal student loans?” Well, under the combined income example, that $604.46wouldbe your payment because you owe 100% of the combined federal student loan debt.
If you file a separate income tax return from your spouse, your payment only considers your income of $60,000. Under PAYE, you would pay $271.13 per month.
| Pay As You Earn (PAYE) Plan Separate Income | |
|---|---|
| Your Income | $60,000 |
| 2022 HHS Poverty Guidelines for Household of Two | $18,310 |
| 150% of the 2022 HHS Poverty Guidelines for Household of Two | $27,465 |
| Discretionary Income (Combined Income Minus 150% of the HHS Poverty Guidelines Amount) | $32,535 |
| 10% of Discretionary Income | $3,253.50 |
| Pay As You Earn Monthly Payment | $271.13 |
In conclusion, if you choose PAYE, IBR, or ICR and file a joint income tax return with your spouse—or if you choose REPAYE (regardless of whether you file jointly or separately)—we will use your combined income to calculate your IDR payment.
4
Consult a tax or financial advisor before making any decisions about how to file your taxes.
If it seems like your combined income is a disadvantage, you can file a separate personal income tax return to ensure that only your income determines your payment. However, before you choose that option, you should consult a tax professional and consider your total financial situation.
That’s because filing taxes separately can make some IDR plans more affordable, but you could also pay more tax and lose benefits, including the following:
- A more advantageous tax bracket
- The student loan interest deduction
- The childcare tax credit
- The earned Income Tax Credit
It’s often difficult to figure out whether the tax benefits you lose are worth the money you may save on your monthly payment, so ask for professional advice from a tax or financial advisor.
Marriage will change your life in many ways, including your financial future. As you combine and plan your finances, make sure to have a conversation about student loan debt. Student loan debt can affect current money matters like your credit history, credit score, and discretionary income, as well as your future goals.
