4 Things to Know About Marriage and Student Loan Debt

Loan RepaymentTips for Success4 minutes

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 who has student loans, the loan type, the loan balance, monthly payment, payment history, and the payment status. Next, discuss the original student loan repayment plan. Your newly minted marriage status will likely cause it to change.  Last, explore your payment plan options using the estimating tools and resources on StudentAid.gov to help plan your financial future.

1

You have more than one way to repay.

You have several ways to repay your federal student loans. These strategies include either a standard payment that divvies up the amount you owe over time or an income-based or income-driven payment that aligns your student loan payment to your adjusted gross income. 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. We will generally do the following:

  • Use your joint income for an income-driven repayment (IDR) plan if you and your spouse file a joint tax return.
  • Use only your income if you file taxes separately from your spouse.  
  • Reduce your payments to account for your spouse’s student loan debt if you file taxes jointly.

Regardless, you must recertify your income and family size each year to remain on the IDR repayment plan.

This table shows how we 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

We’ll reduce your payments to account for your spouse’s student loan debt if you file joint income taxes.

Any time 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 his or her federal student loans under the same repayment plan.

Here are some examples.

Let’s say you file a joint income tax return with your spouse. You earn $40,000. Your spouse makes $60,000. You don’t have kids, and you live in the contiguous 48 states. Your combined income is $100,000.

Under the Pay As You Earn (PAYE) plan, payments are 10% of your discretionary income, which uses poverty guidelines. That works out to $615.58 per month.

Pay As You Earn (PAYE)
Plan Combined Income, Different Salaries
Your Income $40,000
Your Spouse’s Income $60,000
Combined Income $100,000
2021 HHS Poverty Guidelines for Household of Two $17,420
Discretionary Income $73,870
10% of Discretionary Income $7,387
Pay As You Earn Monthly Payment $615.58

Now, let’s say that you and your spouse each owe $40,000 in federal student loans for a combined total debt of $80,000. Stated differently, you each owe half (50%) of the combined federal student loan debt. Divide your PAYE monthly payment in half. Now, you pay $224.46 instead.

Pay As You Earn (PAYE) Plan
Combined Income Same Salaries
Your Income $40,000
Your Spouse’s Income $0,000
Combined Income $80,000
2021 HHS Poverty Guidelines for Household of Two $17,420
Discretionary Income (Note: 2021 HHS Poverty Guideline is $17, 420) $53,870
10% of Discretionary Income $5,387
Pay As You Earn Monthly Payment $448.92
Each Person Pays 50% of Monthly Payment $224.46

If your spouse independently applies for the PAYE (which he or she would have to do to enroll), your spouse will pay $224.46 per month. If your spouse chooses a different repayment plan, his or her payment may differ, but it will not affect your calculated payment of $224.46.

Now I hear you saying: “But what if my spouse doesn’t have federal student loans?” Well, under the combined income, different salaries example, that $615.58 would be your payment because you owe 100% of the combined federal student loan debt.

If $615.58 isn’t affordable and you’re interested in an IDR plan, the Revised Pay as You Earn (REPAYE), PAYE, Income-Based Repayment (IBR), or Income-Contingent Repayment (ICR) plans, you can file separately from your spouse.

If you file a separate income tax return from your spouse, your payment only considers your income of $40,000. Under PAYE, you would pay $115.58 per month.

Pay As You Earn (PAYE) Plan
Your Income
Your Income $40,000
2021 HHS Poverty Guidelines for Household of Two $17,420
Discretionary Income (Note: 2021 HHS Poverty Guideline is $17, 420) $13,870
10% of Discretionary Income $1,387
Pay As You Earn Monthly Payment $115.58

In conclusion, if you file a joint income tax return with your spouse or choose REPAYE, we will use your combined income to calculate your IDR payment.

4

Consult a tax or financial advisor before making any major decisions regarding your repayment plan.

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:

  • A more advantageous tax bracket
  • The student loan interest deduction
  • The childcare tax credit
  • The earned Income Tax Credit

It is 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. This talk is especially important if either you or your spouse has student loan obligations or plans to go back to school. Student loan debt can affect current money matters like your credit history, credit score, and discretionary income, as well as your future goals.

Ian Foss is a Program Specialist at the U.S. Department of Education’s office of Federal Student Aid.