For married couples with student loan debt, one of the most popular strategies for lowering your monthly student loan payment and potentially qualifying for more student loan forgiveness is to file your taxes "married, filing separately".
For both Income Based Repayment (IBR) and Pay As You Earn Repayment (PAYE), your monthly student loan payment is calculated based on your Adjusted Gross Income (AGI). If you're married and file a joint tax return, your monthly student loan payment is calculated on your joint AGI.
So, a simple way to potentially lower your student loan payment and increase your potential student loan forgiveness is to lower your AGI - and married couples can potentially do this by filing separately versus jointly.
If you're not quite sure where to start or what to do, consider using a service like LoanBuddy to help you understand the best options for your student loans. LoanBuddy will help you make the smartest decision for your student loan debt. Check out LoanBuddy here >>
The Problem With Married Filing Separately For IBR Or PAYE
There are two big issues to consider with this approach. First, this doesn't apply to the Revised Pay As You Earn Repayment Plan (RePAYE). With RePAYE, no matter how you file your taxes, the married joint AGI is what is taken into consideration.
Second, and typically a bigger issue, is that the math doesn't always make sense to do it. You see, when you file separately, you typically also have to pay more in taxes as a couple. As such, you have to outweigh the potential savings from your student loan debt against the higher taxes you'll face. Even if you save a little on your monthly student loan payment, it might not outweigh the higher taxes you'll face each year.
Let's look at a couple of scenarios and see how the math behind married filing separately for IBR and PAYE really works.
The Sweet Spot For Married Filing Separately For IBR Or PAYE Maximization
Note: This article has been updated to reflect the 2018 tax changes. If you've viewed this article before, you may have noticed the numbers have changed. One of the changes if you cannot deduct your student loan interest if you file separately.
Let's start with the ideal scenario, because that's what everyone cares about. So, let's set up this scenario as it's pretty typical. We have a couple, with Person A and Person B. They have one child that is 10 years old.
Person A makes $40,000 per year and has $50,000 in Direct Loans.
Person B makes $60,000 per year and has no student loan debt.
Let's look at how their tax return looks. For simplicity, both partners only have W2 income for their AGI.
Married Filing Separately Versus Jointly | |||
|---|---|---|---|
| Person A | Person B | Joint Return |
Earnings | $40,000 | $60,000 | $100,000 |
Student Loan Interest Deduction | $0 | $0 | $2,000 |
Adjusted Gross Income | $40,000 | $60,000 | $98,000 |
Standard Deduction | $12,000 | $12,000 | $24,000 |
Itemized Deductions | $0 | $0 | $0 |
Taxable Income | $28,000 | $48,000 | $74,000 |
Regular Tax | $3,173 | $6,500 | $8,499 |
Tax Credits (Child Tax Credit) | $2,000 | $0 | $2,000 |
Taxes Net Of Credits | $1,173 | $6,500 | $6,499 |
As you can see in the above example, this couple saves $1,174 per year in taxes by filing jointly.
However, Person A also has that $50,000 in Direct Loans. If this couple files a joint tax return, they do not qualify for IBR or PAYE. If we assume this couple is looking for the lowest payment option for their loans, the best option is the Extended Repayment Plan. Their payment would be $347 per month for 300 months (25 years) - the same length as IBR. That equates to $4,161 per year.
Now, if this couple files married filing separately on their taxes, they will pay $1,174 more per year. But it opens up more repayment options for Person A. For example, Person A will now qualify for both IBR and PAYE.
For PAYE, the monthly payment will $74 per month, with the potential for loan forgiveness of $64,424 after 240 months.
For IBR, the monthly payment will be $100 per month, with potential loan forgiveness of $11,948 after 300 months.
So, if Person A switches to PAYE, they will save $273 per month in student loan payments alone. That equates to a savings of $3,276 per year in student loan payments.
So let's combine both the higher taxes and lower student loan payments and see what we get:
Student Loan Savings By Filing Separately | ||
|---|---|---|
Filing Jointly | Filing Separately | |
Total Tax Due | $8,499 | $9,673 |
Total Annual Student Loan Payments | $4,161 | $888 |
Total | $13,521 | $10,561 |
So, by making the switch from filing jointly to filing separately, you can expect to save $2,960 per year. Plus, you put yourself on track for potential student loan forgiveness after 20 years as well.
When It Doesn't Make Sense To File Separately For IBR Or PAYE
There are a few scenarios where it doesn't make sense to file separately in order to save on your student loan payments. However, everyone should run the math for their unique situation to decide for themselves.
Some rules of thumb for when it might not make sense:
- When the student loan borrower makes more
- When the income of the borrower wouldn't qualify for IBR or PAYE separately
Easy Ways To Do The Calculations
This may seem a bit overwhelming because there is a lot of math and scenarios to plan for. However, most tax software programs allow you to calculate the difference in taxes you'd pay under both married filing jointly and married filing separately. If you utilize an accountant to help with your taxes, they should also be able to provide you with the differences as well.
Then, you can look at your Federal loan repayment options on the Department of Education Repayment Estimator.
Finally, you just add up the costs. You can use the chart above as a guide to see how your tax and student loan payments would add up, and see which way to file your taxes saves you the most money in total.
What About The "Tax Bomb"?
A lot of people get concerned about the potential for a tax bomb due to the loan forgiveness associated with income-driven repayment plans.
And while this is a valid concern, we don't think it will apply to most borrowers due to an IRS rule called insolvency. We break down all the math and explain it here: Student Loan Discharge and Insolvency.
Furthermore, it's not something you should even worry about. Instead, focus on finding a repayment plan that you can afford each month, and then reassess as your income rises over time. The worst thing you can do with your student loans is to avoid making payments. Even an income-driven payment is better than nothing.
Get Professional Help
If you're not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
You can also always call your lender, but they might not be able to help with this complex situation over the phone.
Conclusion
Depending on your tax situation and student loan amount, it could save you money to file your taxes married filing separately so that you can qualify for IBR or PAYE and save on your student loans. However, you have to remember that you'll pay more in taxes, so it's important to do the math and see what scenario makes the most sense for you.
Ryan says
I just applied for reevaluation of my payment plan on my student loans. My payment is MORE now. Several hundred dollars more a month. I selected the REPAYE plan.
What is the cheapest option? I can’t afford this doubling of my payments a month.
Robert Farrington says
Ryan, it depends on your situation. RePAYE always uses your married filing jointly income, so it could raise your payments. You also have to resubmit your income every year, so if your income goes up, so does your payment.
debbie johnson says
My daughter n law has defaulted on student loans she had prior to marrying my son, needless to say their married filing joint tax return of 7,000 got seized. My son earns over 80,000/year and she earns less than 20,000. What are her options to get her loans back on track. She owes $25,000.00 in government student loans. Apparently none of the 7,000 has been applied anywhere.
Robert Farrington says
You’re correct – that $7,000 will go to collection costs, interests, and fees – none will go towards the loans, and the balance will keep growing.
She needs to rehabilitate her loans and get on an income-driven repayment plan. Check this out: Student Loan Rehabilitation.
Kristin says
My loans will also double the payment this year bc I got married. We were already barely getting by using his income to pay loans before. I don’t know how we will make it now. We plan to buy a house immediately, then I may plan to default. What they sanction every month will be less than my scheduled payment. It’s sad that it comes to this!! It’s scandal!
Robert Farrington says
Please don’t default on your student loans… it’s one of the worst financial moves you can make. See this article: What Happens If I Default On My Student Loans.
Nick Vail says
Robert, great article, as always! I work with a number of professors who make a good amount of money (usually married filing jointly) and have 2-3 kids. I have been showing them PSLF. Would you typically suggest IBR or the revised PAYE?
Robert Farrington says
I typically recommend IBR or PAYE, and avoid RePAYE. There are few scenarios where RePAYE makes sense, most notably because it always uses your married filing jointly AGI and you don’t have options to file separately. However, every scenario is different, and in some cases, if you have Direct loans prior to 2007, it might make sense to do RePAYE anyway.
Michele says
Is there any please to physically go to have a face-to-face conversation about what plan is best for my particular situation? I am IBR but not sure whether I should file married or jointly. My husband was out of work 18 months ago for almost 2 years – we have a lit of credit card debt from that time period making loan payments difficult. Who can we go see? Thank you
Robert Farrington says
No, sorry, there isn’t a place for you to meet face to face for your student loans. The Dept of Education should consider that though. To do the calculation here, though, you should talk to your tax preparer to do the calculation yourself with a free calculator on TurboTax or H&R Block.
Matt says
If I go with Married Filing Separately to keep my payments down, can I go back and amend my return to Married Filing Jointly at a later time? I know this is kind of “working the system”, but I’m curious if it’s a legitimate loophole, or if there are laws against it.
Robert Farrington says
Yes, but it’s best to consult with a tax advisor before making changes one way or the other.
Stephanie says
Given the new tax law, is this still considered an option? Does it have any affect on future plans to file MFS, as we want to continue using only the borrowers AGI to calculate the repayment under IBR and are in year 6 of 10 of PSLF?
We are working with a tax professional, but would hate to make a mistake his far into PSLF when 2017 was the first year of marriage and we did MFS, but are now looking into an amendment.
Thank you!
Robert Farrington says
From TaxSlayer.
You can amend a Married Filing Joint (MFJ) return to a Married Filing Separate (MFS) return and vice versa. When amending a MFJ return to a MFS return, first delete all information associated with the spouse on that return. This includes all Form W-2s, Schedule Cs, Schedule SEs, etc. Anything that can be denoted as ‘spouse’ needs to be deleted. Next, change the filing status to MFS.
NOTE: Once you have filed your tax return as Married Filing Joint (MFJ), you CANNOT amend your filing status after the April 15th deadline. Any change to filing status has to be done before the deadline.
When changing from MFS to MFJ, select the taxpayer you’d like to be the primary taxpayer. Change the filing status to MFJ, then add all information pertaining to the other spouse.
NOTE: Once you’ve filed your tax return as Married Filing Separate (MFS), you have three years from the original deadline to make the change to your tax return. This deadline DOES NOT include any filing extensions.
Your PSLF eligibility has nothing to do with your tax filing status. Each of your PSLF payments are counted individually (and need to add up to 120). Your tax filing status will only impact your loan payments, which could impact how much is forgiven in the future and how much you pay in taxes today.
Sherry says
my daughter is in this situation. she even hired an accountant to help her file taxes so she would do this correctly. we are now finding out they did it wrong.
she works for a nonprofit ..is in a loan forgives program ..has student loans both fed and collegiate and spouse is a dreamer. they sought help filing taxes since they also got married. the accountant didn’t ask her probing questions .. just filed her taxes..(we all could have done that) and now….her payments have almost tripled due to filing married jointly. it’s very apparent now after the fact she needed to file married separately. her loan was 27,000 so yes we needed to keep these payment low or defeats the purpose of this loan forgives … there will not be much forgives this way and she has to work 10 years for nonprofit to earn the forgives benefits. is she now just out of luck for the next 12 payments. ….really going to cause hardship for her. so even the accountant can’t file the 1040x to fix this? we didn’t know and the accountant didn’t ask any probing questions so now here she is with very large payments she cannot afford. your thoughts?
Robert Farrington says
Well, the payments are based on their joint income, so hopefully they can work together to afford the payments.
She can re-certify based on her paystubs, but it will still be a higher amount that filing her taxes – it will use the gross income versus the net income (that’s the rule for alternative method).
I would wait 2-3 months, the do this. Then, file separately if it makes sense. Only they will know the math if it does.
Josh Hillemeier says
Hello: I live in CA, a community property state. Under REPAYE, if we file separately, is our individual income, after splitting everything, how each person’s payments will be determined? Or even in a community property state, does the joint income determine the monthly payment?
Josh Hillemeier says
I should add that we both have student loan debt, though my wife is paying back through a standard repayment plan. I am currently in REPAY with a much larger debt load. Our strategy has been to file separately, thus keeping my payments low, while paying off my wife’s loans aggressively.
Robert Farrington says
Under RePAYE, it doesn’t matter your filing status, it always considers your combined income (AGI). This only applies to IBR and PAYE.
Josh Hillemeier says
Even though my wife is paying back through standard repayment? As such, she’s not eligible for any IBR repayment plan. Thanks for your service.
Robert Farrington says
Yes, the rule under RePAYE is that it is always combined AGI if you’re married. It has nothing to do with her loans or repayment plan.
Elizabeth says
I am considering staying home with my children, but my husband and I are strapped with loans (loans prior than 2007 so no option for PAYE). Would we be taxed too much if I claimed Married Filing separately and did IBR? From what I understand, with that option I would pay nothing on my loans while claiming MFS. Another thing I heard is that they hit you with the taxes when you return to work so I am unclear what to do. Any advice?
Robert Farrington says
It’s best to speak to a tax accountant to run the different scenarios for you. Many accountants can quickly prepare a return for both MFJ and MFS and tell you which would be the better choice.
Kevin says
Thanks for all of the great information. One of my questions relates to how the debt “appears” under the PAYE program. According to the calculator on the FSA website our payments would be $0.00 but not entirely sure whether that is accurate. We are trying to apply for a mortgage and wondering if under the PAYE program whether an amount is reduced monthly that would appear on a credit report, etc.
Also, the FSA site mentions to qualify for the PAYE program one must, “Continue to make income-based payments under this plan, you must have a partial financial hardship (and be a new borrower).” Since these loans have been on deferment, would they be eligible? Thanks-
Robert Farrington says
Yes, you can switch to PAYE while on deferment. Just call your lender or go online to studentloans.gov.
When applying for a mortgage, your lender uses either of the following to calculate your monthly payment for Debt to Income ratio purposes:
– 1% of the balance of the loan amount
– your standard 10-year payment plan amount
Many people find they have trouble qualifying for a mortgage because of this. Remember, the lender is looking out into the future – so since your payment could rise if your income does (and it caps at the standard 10 year plan amount), that is what’s used for your debt to income ratio.
Adam says
Great article Robert! Thanks for writing this. I have been paying IBR for 5 years, aiming to take advantage of public service loan forgiveness after 10 years. For that reason I’m aiming to keep payments as low as possible. I just got married this year, my wife has paid off her loans but mine are considerable. I make several thousand per year more than her annually ($75k / $70k). While I make more, I’m not sure if filing jointly makes sense if I’m hoping to keep payments low to leverage PSLF. Any thoughts?
Robert Farrington says
You have to do the math. Most tax software and tax professionals can easily calculate this for you. PSLF is a great program, but you have to do the math.
Nora Stephens says
Robert,
I am enrolled in the PSLF program and currently on the Income Driven Repayment plan. I have done the math; it seems that filing married but separate would be wise as my payment would be hundreds of dollars less a month. In earlier comments, I saw that you advised using the IBR or PAYE repayment plans. On the FedLoan website, it states you have to have a partial financial hardship to qualify. What constitutes as a partial financial hardship for these federal loans? And if I were able to qualify this year, when I re-submit information the following year, will they automatically keep me in the IBR or PAYE, or will I have to prove that I have a financial hardship every year?
Among other debts I am trying to pay off, I would like to save for my kids college so that they don’t have to deal with the stress of tens of thousands of dollars of student loans post graduation…does that count as a financial hardship? HA!
Thanks for any advice!
Robert Farrington says
Partial financial hardship means your income is low enough that 10 or 15% of your discretionary income would be less than your standard 10 year repayment amount.
You can calculate your discretionary income here.
If you get on these programs, you have to re-certify your income every year. Your payments could rise, but they won’t exceed your standard 10-year plan amount.
JJ says
I have student loans which I obtained before marriage and am not employed. My spouse is employed. Will my loan payments be based on my spouse’s income? He is not a co-signer and we have not co-mingled our debts.
Robert Farrington says
If you’re on IBR or PAYE, it’s based on your combined AGI is you file together. On RePAYE, it’s always based your combined AGI regardless of how you file.
Megan R. says
Hello!
My husband and I are newly married and live in California, a community property state. I make $60k/year, have $36,000 in student loan debt, and am on IBR to pay back my loans under PSLF. My husband makes $80k/year, has $105,000 in student loan debt, and is on IBR to pay back his loans under PSLF as well. We have no dependents and do not own a house.
We are trying to do our taxes this year and have reached out to a tax professional at H&R Block here in California, who seemed to know nothing about MFS in a community property state. I am fairly certain MFS is right for us, but if anyone out there has any advice, we’d love it!!!
Robert Farrington says
You need to speak to a real accountant/tax professional. Tax preparers (like what you’ll find at H&R Block) are not tax professionals or accountants. You could also do the math yourself using online tax software if you prefer.
Megan R. says
Thank you! 🙂
GH says
My wife will finish graduate school by the summer and will get a job with a school to be in the 10 year program. Her loans are pushing 300k and the difference between filing MJ (1500) and MS (700) is 800 a month. That’s basically a 10k a year difference.
I made 86k and maxed out my 401k so my MAGI is 68 and I paid over 13k in taxes. Using just the standard deduction I should get back 1700 or so. Her MAGI is about 74 and paid almost 12k in taxes. She’ll have to pay but at this time it seems worth it to file separate. I’m sure there is something I missed and we’ll end up paying 7k or something. lol
We are both around 50 and have no kids or plan to. The only downside is she can’t deduct loan interest but it is capped at 2000 or 2500 anyways.
I think as long as I max out my 401k it’ll help towards filing MS….I hope anyways. We visit our tax lady next week to compare.
Brian says
I’ve been married filing separately to qualify for the IBR for a few years now. This time around, the application is requesting my spouse’s income.
I contacted the Federal Student Aid Office (studentloans.gov) and they told me that they now look at total income (both spouses) whether you file separately or not, and that they changed the policy last year.
This sounds fishy to me, and someone told me over the phone the opposite answer. Nevertheless, my application is requesting my spouse’s income and I’m worried if I send that in I’ll be disqualifed for IBR and will end up with an enormous payment…
Any idea what’s going on here?
Robert Farrington says
They go by your total adjusted gross income for RePAYE – both IBR and PAYE can still just be based on your income. You can file the paper form manually (not online).
Monica says
GH, I’m in a similar situation and they are asking for proof of my husbands income. The IBR plan I applied for in the PAYE which means they shouldn’t need his financial informations since we filed separately. Did you need to submit your wife’s income documentation? Did they end combining your incomes for your repayment plan?
thanks
William Resor says
So I was curious about this and yep, I was on to something. I have finished one year of PSFL and was on an IBR. I resubmitted income and my payment went up. I am not sure if the first year asked about my wife’s income but now I am back on in-school deferment. I want to resubmit due to making less money due to working a Chaplain Residency (1/2 of pay is non-taxable for housing allowance). What is the best way to do this? Maybe a paper application??? Any advice is greatly appreciated.
Robert Farrington says
Yes, send in a paper application certified mail: IDR Plan Request.
Amanda says
Hi Robert, Just to clarify, I attempted to make a change to my plan with Great Lakes. I noticed when I went through the FAFSA website, it would allow me to select plans through the process, but then at the end I had to select a box that basically said it would be up to my lender. The way around this through filing via paper?
Thank you!
Robert Farrington says
Yes, you can file by paper application and it’s better in this scenario. You can find the application here.
Just make sure you send it certified mail with a return receipt so you can prove your lender received it. And it is up to your lender, but they are required by law to allow it if you qualify.
Lauren says
I’m a college professor and got wise to this a few years ago. As soon as I got accepted into PSLF, I started filing married separate and chose IBR. We have 5 children and I’m ~100k in debt. My husband makes much more than I do, so “on paper,” with 5 dependents, with my income, I’m a hard case 😉 This move dropped my monthly payment by about $750, and coupled with my 120 payments to forgiveness (I’m about 30 in), I will save nearly $90k in the end.
Sean says
This is what I plan on doing! I do not qualify for IBR if filing jointly (AGI too high). And my payment is almost $7k more under REPAYE. I see that we will pay about $3k more in taxes if we file separately, but I am still saving $4k overall. I am just curious… are there any unforeseen consequences to filing separately? I know I will miss out on some tax credits. And I found that there is a “penalty” if I switch back to REPAYE from IBR (which I would do if for some reason we decided to go back to filing jointly). This information is not available publicly and varies depending on what customer service agent I talk to (unfortunately a little too common of a feature that goes with Fed Loan Servicing and the PSLF program). It seems to me, if I continue filing separately, and the PSLF program actually pays off this is great, because it also incentivizes me to pay into retirement and further reduce my AGI and monthly IBR payment. I just hope I’m not missing anything here. Best to all!
Robert Farrington says
What type of “penalty” are you talking about? If you want to switch from one plan to another, you can do so once per year, so long as the maximum loan term for the new plan is longer than the amount of time your loans have already been in repayment.
Sean says
I was told- If I change to IBR (qualifying via filing separately) we must continue filing separately, or I will have to go back to REPAYE and the student loan payments will increase to cover the difference between REPAYE and IBR that I saved during that period.
Robert Farrington says
Ahh, I see what you’re talking about. It’s not technically a penalty, but you’re making up the difference in lost loan payments over the remaining time of your RePAYE. It’s basically as if you never left RePAYE.
For example, if you pay $200/mo under RePAYE, then drop to $100/mo under IBR, if you go back to REPAYE, you have to “pay back” that $100/mo ($1,200) difference over the remaining life of your loan.
The one true penalty for leaving RePAYE is that your unpaid interest will capitalize when you switch out of REPAYE, but it’s all going to be forgiven in PSLF, this is essentially irrelevant.
Warren says
Great article. Thank you.
My wife is on her third year of IBR (not RePAYE) and currently qualifies for PSLF. Her annual salary is roughly $55,000 and she has over $300,000 in loans. My salary for 2016 was $70,000 and I do not have any loans. Next year my salary will be $250,000.
In order to protect her future eligibility for IBR and PSLF do we need to file Married but Separate for 2016 or can we file jointly in 2016 to receive the benefit and then file separately in 2017 when my salary increases. We are having an accountant run the 2016 numbers (joint vs separate filing) and will weigh that against what her adjusted monthly payment would be next year. But we also want to make sure we are not jeopardizing her PSLF or monthly payments in the future. We appreciate your advice!
Robert Farrington says
PSLF doesn’t care how you file your taxes – you just need to be on IBR. Even if that amount of the IBR payment equals the standard plan, IBR is what matters.
For PSLF specific questions, you might find our short eCourse helpful.
Kyle says
Hi Robert, thanks for the article very useful. My family is in almost an identical situation as described in your example above, except add $50,000 student loan debt to person B too. We have been paying the 30-year payoff amount for about 6 years now but as our family is growing finances get tighter. We are looking at switching to IBR, but after reading your article it looks like we cannot until we switch to Married filing Separate, is that correct? (We have two different government-backed servicers so I was wondering how they’d know our AGI but Student Loan debt separate.)
Thanks,
Robert Farrington says
You can switch anytime, but it will use your combined AGI if that’s how you filed your taxes.
Keith says
I have a similar question to those above with comparing MFS and MFJ in Community Property State (Texas) and how it will impact the student loan payment for my wife’s student loan. She is a school counselor with about $40K in student loan debt and is currently paying under the PAYE plan. I make about $110k and she makes about $65k annually. How is her student loan payment calculated each year if we file MFS in a community state? I want to make sure that it’s worth filing separately instead of jointly.
Robert Farrington says
You need to speak to an accountant or tax professional to do the math for you to see if its worth it. But generally, you must split all the household income and expenses on each return, not just his income/her income. So, in your example, you each would have income of $87,500.
Tony S says
Robert, so for this case is $87500 [the reported MFS 1040 Line 21 basically] going to get reported as the income of just one person to the lender? I feel this is not representative of the one person’s income in community property state but Pub 555 makes us all report it that way, even though it’s not indicidual income rather community income. Thoughts how to avoid reporting (a+b)/2 as income?
I think great lakes had a system where you report “alternate method” such as a pays tub and as long as you file seperstely…..you’re good to go. Do u recommend using the paper form always now with the lenders ?
Robert Farrington says
I always recommend using the paper form. However, I don’t recommend using the “alternative method” via paystubs. I recommend submitting your individual tax return.
The reason is, when they calculate the alternative method, they leverage your gross pay from the paystubs, not your net. So, your monthly payment will be higher. The reason for this is they can’t make assumptions on what your end of year AGI will be – they have to call it via the gross pay. So, use your tax return, file paper with return receipt so you have proof of date and that it was received.
Tony S says
I undestand. However, in community property states the lower earner will always report higher AGI than their gross salary because of Pub 555 forces the tax payer to report on 1040 line 22 = ( a+b) / 2. a= one person income and b=the others. So to Great Lakes and other lenders it “looks” like they earned more than they did, even with MFS. The only solution I have found is to send paystub, tell GL their spouse will not give you access to his or her return, and deny any request for your tax return [by saying the income significantly changed each and every year]. Has worked so far…..seems utterly shaky year to year though. I wish there was a more accurate way to do this. We are on IBR. [The old one].
Robert Farrington says
Even using your paystubs will be a higher payment as they use your gross income, not your net. However, you still might be better off.
Melissa says
If I was to consolidate my student loans and start the IBR plan under the PSLF program what income would they use, my taxes from 2016 that I just filed in 2017? We filed MFJ this year but want to do MFS for the future. Does that mean we will pay the MFJ until we can change to MFS next year? The only reason we had to file MFJ this year is because we used the affordable care act and I think it is a requirement.
Thanks for such an informative blog.
Robert Farrington says
They would use your income from 2016 AGI.
Maggie Peterson says
Great conversation here – thanks! I don’t believe I saw this question above, and have not been able to find an answer. We have done the math, and it makes sense for my husband and I to file MFS. On our taxes though, I claimed one of our children, and my husband claimed the other. Will this become a factor when I go to re-certify my IBR? The loan calculator asks how many children we have, not how many I am claiming – is this correct? I just don’t want to have a rude awakening when I go back to re-certify my IBR, if they consider my family size 2 instead of 4, based on my 1099.
Robert Farrington says
They should go based on your taxes.
Rob James says
What a great resource. Thank you! I’m confused about filing separately on the IBR program. Every year I go through the questions, and it asks you for your AGI. If you file separately, it asks you to certify your spouse’s AGI. How are people limiting the IBR to their own income without misrepresenting those numbers? In our case, my wife makes a great income ($160K). But, we have tremendous expenses and huge student loan debt on both sides (mine is $120K and hers is 60K). I stay at home with our four children (two of whom are special needs). So, effectively, my income is $0. However, we moved to Texas, a community property state, so my AGI will be something like $60K with five total dependents. For us, it’s critical to figure out how to lower one person’s loans while attacking the other. We’ve found if we hit them both equally, it’s like digging a ditch with a teaspoon, if that makes sense. We have a shovel as long as we keep one our loan payments low. Is the IBR going to be my best bet going forward, and can I really file separately and NOT include her income? Thanks so much!
Robert Farrington says
Yes, if you file your taxes MFS, you don’t report her income. You select the option that says you cannot access her income – because that’s how the IRS views it when you file.
Rob James says
That’s actually the way Navient explained it to me as well. The curve ball is that we live in a community property state. They actually told me to go ahead and file a joint return and simply send them a letter stating that I have no W-2’s (I stay at home with our special needs children and draw no income). Does that sound correct? Their point is that the alternative documentation will suffice and makes the need for separate filing irrelevant but only because we live in one of the few community property states in the country.
Robert Farrington says
You would submit the alternative documentation as highlighted and your payment doesn’t have to include community property income, but you still should file separately.
Eric says
Robert,
I have been taking student loans out since 2001. Currently finishing another degree in 16 weeks. I’ve never have had to paid on a student loan because I’ve essentially been enrolled or in deferment over the past 16 years. Currently I am looking to figure this out as I have a family and we want a house.
120,800 in student loans
Married with 1 baby
I am a teacher in SC – high needs area of business education
My income is 39,00
Spouse income 79,00 with no loan debt / but is an Assistant Principal.
Last year we filed jointly due to our adopted baby and newly married title..
can you help me understand what I need to do? Or where to start?
We live check to check as it is with no student loan payment..
I am really scared my mistakes with college debt will prevent our home ownership dreams & our budget maxed always! Makes me depressed.
Thank you
Sleepless in SC
Robert Farrington says
In general, you need to decide what makes the most sense – it sounds like filing separately would and you could qualify for a very low payment based on your income. Furthermore, you should be looking into Public Service Loan Forgiveness to get the balance forgiven after 10 years of teaching. Read about PSLF Student Loan Forgiveness here.
Sadly, you’re going to have to put the housing dream on hold for a bit. You need to get your loans under control and be able to budget for a full loan payment + house payment if you want to qualify for a mortgage. However, 10 years goes quickly too if you can get your loans forgiven. Read about the challenges of buying a house with student loans here.
Marie says
Hi Robert,
Thank you for this article. I am currently on an IBR but found that I can pay more than what my payment is by working extra jobs. Do you know if there is a penalty for paying more on an IBR repayment plan.
Robert Farrington says
Hi Marie,
That’s awesome that you can pay more towards your loans. However, I don’t recommend it unless you are planning on paying them off early.
With IBR, your payment is based on your income. Any balance will be forgiven at the end. But if you pay more, you could end up seeing less forgiveness. If you’re looking at a program like PSLF, it can really be negative to do: PSLF and Pay Ahead Status.
Marie says
Thank you so much.
Daniel says
In your first example, why would the couple not qualify for IBR or PAYE if they file a joint return?
Robert Farrington says
They make too much to qualify for a “partial financial hardship”.
Tim says
Hi Robert,
I’m wondering if you have any advice for my situation. Three months ago, my wife started her post-collegiate career at a non-profit org. with a $40K/year salary. She has ~$150K in student loan debt, all of which qualifies for PSLF with this employer (9 years and 9 months to go!). Her current IBR monthly payment is $0.
I started my post-collegiate career six months ago, making ~$110K/year, and I have zero student loan debt.
Without doing the math, I presume that we should be filing taxes separately to optimize our yearly combined tax and student loan payment amount. I plan to use the tools that you linked to validate that.
We are hoping to buy our first home soon, and I’m worried about how this might affect our tax filing options. If we obtain a mortgage together (i.e., become co-borrowers), are we jeopardizing our ability to file taxes separately? Or does it only make sense to exclude her entirely from the home-buying process? What all factors do we need to weigh here, given the above?
Also, it turns out that the medical benefits program offered by her employer is better and cheaper for us both to be on compared to those offered by my employer. If we decide to use her employer’s medical insurance (where I am considered a dependent of her), does this affect our tax filing and/or PSLF options in any way?
Thanks for any help you can provide!
Robert Farrington says
Hi Tim,
Getting a mortgage together has no impact on how you file your taxes or hold title on your home. You can both be single and buy a house/get a mortgage together – lenders don’t care about that.
I will tell you that her IBR payment will not count towards your Debt-To-Income ratio – when figuring out how much mortgage you can afford you need to use a payment of her standard plan amount or 1% of the loan balance ($1,500/mo) as her current payment. Then, you can calculate how much mortgage you can afford/will be approved for. You can learn more about buying a house on IBR here.
As for medical, you’re fine. Once again, how you file your taxes doesn’t impact your marriage in any way. If her employer offers medical benefits to spouses, you just have to be a spouse.
Ashley says
I’m confused at the part where you mention that under ibr there isn’t a chance for forgiveness after the 25 years…i was just reading a document about all the repayment options and it said that under any of them there is a chance for forgiveness after the 20-25 years though the time can vary from plan to plan. Also, I’m on IBR and only make 36k per year paying almost $250 per month so now your estimate for the hypothetical 40k person only paying $200 makes me sad.
Robert Farrington says
Hi Ashley,
You only get forgiveness on any remaining balance after the repayment period. In many cases, you pay off the loan in 20-24 years, resulting in no forgiveness.
You can use the Student Loan Repayment Estimator and see how much you’d potentially get forgiven here: Repayment Estimator.
Rachel says
Hi there,
Is it still true that IBR plans do not take your spouse’s salary into consideration if you file your taxes separately? I spoke to a rep. from Fedloan yesterday and they confirmed that verbally, but I wanted to cross reference because I have seen some comments that they have changed it.
Thanks
Robert Farrington says
Yes, this is correct and the entire basis for this article.
Jaime says
I just got married…we both have loans.
While my loan debt is significant (250K) my annual income is about 250K. (pre-taxes).
My husband makes 50K a year and his loans are 60K. He will qualify for the 10 year loan forgiveness plan with his loans.
I would like to file separate because I do not want to be on the hook for his loans. I am paying the mortgage to our home and other expenses as well as $3000/month in loans.
When there is that much disparity in income, and the fact that he will qualify for the 10 year loan forgiveness plan (unfortunately I will not), I believe it makes more sense to file separately until his loans are gone. Is that accurate?
He called today and they confirmed that they will not use my income on the form but I am just having a hard time coming to terms that they will look at my $200K salary from last year and accept his IBR application.
Robert Farrington says
If you file separately, and mail in the forms, the law says you can do it. You need to file a paper application, and when you file your taxes, you need to be MFS.
Also, realize that you will pay more in taxes, so be sure to have an accountant do that math for you. While it sounds like a good move, numbers don’t lie.
Jaime says
Thanks, much appreciated. Yes, we used an accountant last year too but I might ask around for a more experienced accountant as I’m now dealing with more than one source of income (for myself). Thanks!
Marvin says
I just have a question about how payments will work. My husband just filed for consolidation of his $350k in student loans, and will be on the IBR plan (our AGI was 86,715 last year, filing jointly). Using the calculator, I have estimated his payment to be about $779 a month. I am still in in-school deferment as I complete my MBA, and will go through the consolidation process this next May. I have about $280k in loans. When I consolidate and begin payment under IBR, let’s say my payment will be about the same as his: $779, does this mean that he will have a payment of $779 and I will have a payment of $779, or a total of $1,558 per month? Or, is the fact that our AGI is $86,715 going to limit our combined payments to the $779 amount? In other words, will his payment be $779 until I graduate and begin paying my own loans, and then after I consolidate, our combined loan payments won’t exceed the $779 a month (given our AGI stays the same)?
Robert Farrington says
Nope, each of you will face that payment amount. It doesn’t take into consideration other debt repayment – just your individual debt repayment.
xander thomas says
Hi,
My wife and I have student loans mine >150k and my wife 100k. We file taxes seperately. We applied for the REPAYE last year for my wife via paper application (with the assistance of a fedloan employee) but I don’t remember sending in my income information ( I make significantly more than my wife) or signing so I am not sure if my income was taken in consideration. If what is reported here is true, do I have to switch her to IBR or Paye in order for them to consider only her income moving forward? Is there a significant difference in repayments for REPAYE vs IBR or PAYE? In terms of loan forgiveness, my wife is a teacher, if she switches to IBR/PAYE will it increase the time period for loan forgiveness?
Thank you for your help, it’s greatly appreciated.
Robert Farrington says
RePAYE requires both incomes regardless of filing status, as you’ve found out. If you want to switch plans, you have to make sure you qualify for the one which you are planning to switch to. IBR and PAYE are the only income-driven plans where you can file separately and just have your individual incomes counted.
For PSLF, there is no difference because they all qualify. For just getting forgiveness as part of the repayment term, it depends on your loans, payment amounts, and other factors to see if anything will be forgiven.
The big question is taxes – always keep in mind that this will increase taxes, so do the math.
xander thomas says
Thanks much for your input.
Sam says
I think I have my answer that I just have to run the numbers to see what benefits me more but I thought I would ask just for any other opinion.
My wife and I are both teachers. We make about 50,000 each a year gross. Adjusted is more like 35-40,000. I have been filing separate to keep my loans low as well as putting money away pre tax to lower my income. She doesn’t have any loans. I’m about 107,000 in debt for my loans.
We just had our first child last Jan (yes we just celebrated a 1 year bday). My worry is that we will miss out on all the tax credits from having a child. When I called my loan service provider they asked me for my gross but normally they take adjusted gross so I think the numbers they have me might be a little high. I was told about $230 if I file separate and $890 filing jointly. I’m on IBR now but then was told the RePaye would put me at $590. Ive also never been able to claim the loan interest when filing separate. Anyone have any opinions on my best option? I have read so much but am still unsure of the amount of credit per child (we have another on the way). So I am unsure of what will offer me to save the most money?
Robert Farrington says
This is a prime example of where a good CPA/tax preparer comes in handy. Spend the money and have them prepare your returns this year. Then ask him which makes the most sense. This is a tax question more than a student loan question because of all your life changes.
Once you know what each option will be, figure out your loan payment using your AGI. Don’t call your loan servicer (you’re just talking to a minimum wage call center rep) – use the calculator on StudentLoans.gov and see your options yourself. You can then do that math on which is better.
Ian says
This is extremely helpful, Robert. Thank you!
My wife & I live in California. She has a student loan currently enrolled in IBR & confirmed for PSLF. Last year, we filed jointly. We are considering filing separately this year. She earns approx. $48K per year gross, whereas I earn closer to $100K. Her current student loan bill is approx. $1,200/month.
Mid-year, I lost my job. It was extremely hard to pay this loan on her income alone. Once I finally landed a new job, we resubmitted & our payment actually went up. FedLoan calculated the payment based on our combined gross income, basically, as we submitted paystubs. It was a nightmare.
As a result, we are considering filing separately this year to do everything we can to bring her loan payment down. I’ve done quite a bit of research but have two questions. Really appreciate your help with this…
First, even though she is already enrolled in IBR & we have filed separately in the past, would we be able to file separately this year & thus have our loan reduced based on her income alone? My concern is that we will file separately only to learn that it may not have any effect on her bill.
Secondly, as California is a community proper state, what extra steps do we need to take in order to insure that the loan is based only on her income? It’s my understanding that her AGI will still reflect our combined income on the tax return, and it’s my understanding that’s the number the payment is based upon.
Thanks again so much for your help.
Robert Farrington says
Hey Ian,
You can resubmit the paperwork based on your new filing status any time. I’m also curious – did you resubmit online or manually via a paper application. Many time, if you submit online, it simply pulls your tax information and you can’t make an exception to your income. However, if you file via paper, you can use your paystubs to get your payment lowered.
As for your questions:
1. Yes, you can file separately and her AGI would be used for IBR. Remember, this only works for IBR and PAYE. If you select RePAYE as your repayment plan, it always uses your combined AGI regardless of filing status.
2. You need to speak to an accountant or tax professional to do the math for you to see if its worth it. But generally, you must split all the household income and expenses on each return, not just his income/her income. So, in your example of you making $100k and her making $50k, you each would have income of $75k. That $75k (minus deductions) would be what her loan payments would be based on.
Ian says
Thanks so much, Robert. Incredibly helpful.
To answer your question, we resubmitted by mail. We submitted our paystubs, as well. What I believe happened is that they based the paystubs on a year (even though I had not earned for a full year) as well as taking our current MFJ status. The result was basically what we had before. I believe we should have resubmitted immediately after losing my job, and thus not having any paystubs other than unemployment. But again, thankfully, I’m now employed.
Thank you for answering my questions. Just to clarify as there was a typo in my first question, we filed previously as MFJ in 2017 for our 2016 return. So, is there any issue or push back from the loan provider in switching to MFS for this year in 2018 for our 2017 return? I believe you answered the question either way, though, as we can change our status. Just making doubly sure due to the typo, apologies.
We are on IBR, but thank you for the other information.
And regarding my second question, we are speaking with a tax professional but I think we may need a better one! So, if I’m following you correctly, my wife’s AGI – provided that we are in California – will never really be just her income? My hope was that her loan would be based on her salary alone of $50K less deductions for her AGI. But you’re saying that both of our AGIs would be our combined gross income less deductions and then divided in half? So, the end result would be approx. $75K (less deductions) and then her new loan payment would be based off of that figure, correct?
Regardless, though, her loan would be based on $75K (less deductions) if we MFS rather than $150K (less deductions) as MFJ? With a rate of 15%, that is approx. $11,250/yr ($935.70/mo) as MFS versus $22,500/yr ($1,875/mo).
Please let me know and, again, THANK YOU!
Robert Farrington says
There should be no issue switching from MFJ to MFS.
Check with your accountant, but because you’re in a community property state, your income is community property and would be split like that. And like you said, it’s still a better AGI for your loan payment.
Emy says
Hello Robert! Thank you for this wonderful article! I have a question. Currently I have IBR as my repayment plan. I also qualify for PSLF. If I get marry, Can I and my husband filed my taxes as MFS Living and using the same address in our taxes? Or we can only File as MFS if we are separated and living in different addresses?
Robert Farrington says
You can file separately regardless of your living situation. Just realize that you may pay more in taxes than you save on your loans, so you need to do the math.
emy says
Thank you very much for taking your valuable time to answer and understanding my question! I meant to ask *Can my husband and I file our taxes as MFS living at the same address?* After this I promise I will never ask a question at 5:40 AM ever again! Once again thank you very much.
Robert Farrington says
Yes, it doesn’t matter your address.
Kerpal says
I was about ready to file separate to keep my wife’s loan payments on IBR down, and I was thinking about the tax vs. loan payment savings exactly as you outlined here but then I recently learned that the “married filing separate” status basically doesn’t let you contribute to a ROTH IRA. It’s not a well known IRS rule probably because it affects such few people. The nitty gritty of it is if you file “married filing separate” and make more than 10K AGI (which is nearly everyone with a job) then you cannot contribute UNLESS you didn’t live with your spouse at all that year (coincidentally I did not live with her as we just got married last year and I’m still trying to find a job to move out with my wife). Anyways, I really value the ROTH IRA I’ve built up for me and my wife but eventually I’ll probably live with her and we’d have to file jointly. Do you have any guidance here? Do I just have to weigh the value I get from having a growing ROTH versus the savings from a lower payment?
Robert Farrington says
Yup, it’s just what you value and can afford. You might want to speak with a tax professional too to ensure that you’re not missing anything else.
Jarred says
My wife and I were told that partial financial hardship was determined based combined income regardless of filing status. So where we file separately and the best plan looked to be PAYE, she wasn’t eligible based on my income and was placed on the REPAYE plan. That doesn’t seem consistent with your responses above. Are they messing something up with her repayment? Is there a trick to get them to evaluate her IDR application without including my income at all but still being compliant with any laws?
Robert Farrington says
RePAYE requires you use your combined AGI. There are no exceptions if you file separately.
However, you can qualify with IBR if you file separately. You should do a paper application and submit your information that way.
Robert says
Robert, I have noticed that on every plan, borrowers will need to claim what is forgiven as income. (This does not include individuals on the PSLF program.)
Now that means if a borrow is forgiven $60,000 after paying for 20 years on the IBR program, they would need to show that in their taxes as income. There are no IRS rules in place for this situation and in a sense, the borrower may be paying for the same amount on the 10-year plan. So, in the long run, you are tied to debt longer than 20 years!
If you know something I do not know about please elaborate!
Robert Farrington says
You are correct, but we’ve found about 80% of borrowers still pay no tax due to insolvency.
For the remainder, it’s still a really good deal. The absolute worst case scenario if you’re not insolvent AND in the highest tax bracket (which would be very rare given the income level required) would be 37% – meaning you effectively see 2/3 of your student loan balance disappear.
Even then, you could setup a payment plan with the IRS for this much lower balance – still saving money.
So, if you get $60,000 forgiven AND you’re not insolvent, you’d see your tax bill rise by roughly $12,000 or so. That’s a huge discount compared to your balance. And if you can’t afford it, the IRS can setup many more repayment options than what you’d get on your loans to begin with – on this new lower balance.
Sean says
Robert,
Can’t tell you how helpful the reading has been. I can’t seem to figure out a good plan besides filing separately, but maybe you can correct me. If I’m making 105K and the wife about 80K (but as recently as August, this was low enough to create only 50K in income this year, because of raise and time off for a child). I have about 500 a month in student loans (~25K), but in my father’s name, so tough to deduct or renegotiate. She has 252K in undergraduate and law school loans. It seems clear that despite all the advantages of filing together, she’d be going from <500 a month to 1500. Supposed to meet with a CPA tomorrow, but his first instinct was for us to file jointly, which surprised me. Anything I'm missing? I can't see how filing jointly saves us ~12K to make it worth it.
Robert Farrington says
Your CPA should show you the numbers side by side. It definitely could help you at tax time with things like using an IRA to save (and reduce your AGI).
However, your CPA might also not realize how large a difference your student loan payment would be. So, make sure you educate him on the numbers of your loan so that you can make a truly informed choice.
Sean says
Robert,
with IBR is there any penalty to switching to filing jointly for a year that the wife wasn’t working? It wouldn’t seem like it, and we can go back to filing separately as the income situation changes, now that she’s working again.
Robert Farrington says
No, but you would simply need to stay on top of your income certifications as everything changes.
Other Sean says
I keep getting different answers from Fed Loan Servicing on how to calculate family size. I have two kids, and since my wife and I are MFS I figured we would each claim one child. So, therefore I figured my family size is 2 (my child and me). However, I was told by two Fed Loan employees by phone that what I do on my taxes doesn’t matter, so I can put 3 (my two children and me) or maybe even 4 (all of us)- even though I am filing separately. This would really bring my payment down, but doesn’t seem right. I asked for something in writing and I was directed to section 9: Definitions “Family Size” here: IDR Plan Request.
Is this correct?
Robert Farrington says
For your loan, you would want to report is as you report it on your taxes. As to how to do your taxes, you should speak to an accountant or tax professional about that.
Other Sean says
Thank you for your response!
Ok, I have to say I am SO FRUSTRATED that I am turning to an independent (and awesome!) blog over my loan provider for accurate information. How is it that they aren’t giving me accurate information?!
I could follow the advice of Fed Loan Servicing but it feels like I’d be risking my PSLF.
Do you have a source you are using for your information on determining family number? I thought I had one, but I guess not!
Robert Farrington says
If you read that link you provided, it says you can file separately and the Department of Education will count what you file for your taxes. So, your dependents are “what you file on your taxes”.
Now, what you choose for dependents to file is a tax question, not a student loan question. It’s best you speak to a tax professional to determine how many of your children to claim, or if you’re splitting it 50/50 with your spouse.
Dawn says
Hi Robert. I have been single and enrolled in IBR for three years and PSLF. I am engaged and will be married this summer. My husband and I will file married but separate next year. I am worried though because on MYFEDLOAN.gov. it specifically asks about being married when you re-certify each year. I understand that my taxes would be used, but this new prompt does make me nervous. Is there an update on this new question being asked? Will they want me to submit my husband’s income as well?
Robert Farrington says
If you’re on IBR, they don’t need it if you file separately. If you’re on RePAYE, you have to report both. We recommend not re-certifying online, and using the paper form. Send it certified mail with return receipt.
Erica says
Hi Robert,
Thanks for the informative article. I’ve been paying my federal loans REPAYE but am getting married this year and didn’t realize I would have to report my spouses income even if we file separately. Why is this? Do you know how I would change my income based repayment plan then to avoid this? My loans will probably triple if I have to include his income. From what I remember I wasn’t even given a choice with what repayment plan I was enrolled in. Thanks so much!
Robert Farrington says
Why? It’s the law. When they created RePAYE, they were trying to close the Married Filing Separately “loophole” if you want to call it that. You can potentially change to IBR or PAYE if you qualify based on your income – so that’s something to consider.
Erica says
Thanks Robert for your quick answer. When I do the “repayment estimator” on student loans.gov it sounds like based on my income I could qualify for any, but they automatically put me in the “lowest plan,” if I’m remembering correctly. Do you think when I reapply online in the next year I can request to be on a certain plan (PAYE for example) if I call my servicer (my fed loan), or is there another way to apply? Thanks so much! None of these questions ever seem to have answers online.
Robert Farrington says
Yes, you can also file the paperwork manually.
Erica says
Just to follow up with my question- I’m getting married this Sunday and am now worried that I won’t qualify for a different income based plan because I am on REPAYE and his AGI will be taken into consideration. Do you recommend submitting a new application to try to get on a new plan before we get married? Can the application be done at any time? Thanks so much again!
Robert Farrington says
You can file the paperwork manually with just your income.
Brenda says
Hi,
I have recently become separated from my husband (4 months now) and live in a different city. I am trying to consolidate my student loans online but it keeps asking for his income too. We will be getting a divorce within the year and I don’t get any money from him. How can I file for a consolidation loan without using his income? Should I just put single down?
Robert Farrington says
You should fill out the paper application and send it in certified mail.
Sarah says
In the article, you say, “For PAYE, the monthly payment will $133 per month, with the potential for loan forgiveness of $45,630 after 240 months. For IBR, the monthly payment will be $200 per month, with no potential forgiveness after 300 months. ” Why wouldn’t there be forgiveness for the IBR amount that was left after 300 months?
Robert Farrington says
Because if you make all the payments, the loan would be repaid in full before any forgiveness.
Jessica says
Hi Robert,
I am trying to recertify my IBR right now. I’m a US citizen who lives with my UK national husband in the UK. We were married in 2017 and this is the first time I’ve recertified since being married and living in a foreign country. The recertification form for the IBR says I need to provide my husband’s income, eventhough I used married filing jointly in this year’s tax return, and they want a copy of his federal tax return, which he doesn’t have, as he’s not a US citizen. Do I have to provide them with his income information even if I am married filing jointly and he’s a foreign national?
Robert Farrington says
Talk to your loan holder – they can often take alternative documentation which sometimes can be a signed statement. You may have to escalate your question due to the odd circumstances. I would consider sending the question via email rather than calling and outlining all the facts as much as possible.
Shula says
Hi Robert,
Hopefully you can help. I make 52k/year and hold 62k in student loan debts, and am currently on IBR, I believe. My husband has about 30k a year but is still in school and so is in deferment on his loans and only making about 20k a year. We got married last year so this winter was the first time I recertified as married filing jointly– since his income is so low it did not affect my payments that much. However, once he finishes school we’ll both be paying loans back.
My question is: on all the income based plans, your payment is calculated as a percentage of your income. But married filing jointly, it’s a % of joint income. However, if we are both expected to pay 10% of discretionary joint income, then 20% of our discretionary income will be going towards loans, correct? Or is there a way to combine them so that only 10% of our discretionary income goes towards loans? And if we combine them will that wipe out the history of payments I’ve made towards my loan forgiveness threshold?
Robert Farrington says
You would each be responsible for 10% of your discretionary income for your loans…
You cannot do spousal consolidations (it was offered for a time but it was a very bad deal).
Josh says
Hi Robert, thanks for the very helpful article. I live in CA (a community property state), and my fiance has a large amount of student loans and makes significantly less than me. She is repaying her loans through PAYE or IBR (apologies, I forget which), but she eventually hopes to receive public service loan forgiveness. My income is substantially higher than hers. If we were to file married filing separately, do you know whether half of my income would be included in her income?
Robert Farrington says
If you are using tax returns as proof of income, her income will be 50% of AGI (so it would be higher) since it’s community property.
However, you can use alternative documentation for her income if her income doesn’t accurately reflect that. That’s using pay stubs, etc.
Rie says
Hello! Stumbled on your article while searching for repayment options and it looks to possibly be beneficial for my situation. My question is, will this work with PPL loans? I am currently in the “Extended Repayment Plan”. I inquired about consolidating to an ICR but they asked if I file jointly with my husband and his income is much higher than mine so the payment is higher than the Extended Plan. If I consolidate to an ICR and file separately will they only consider my income?
PS. We have no dependents
Robert Farrington says
If you already file MFS, then you can use just your income for ICR.
Rani Khan says
I have large student loan. It started at almost $180,000 It was consolidated for 30 years. I paid about $1,000 a month for 8 years. Now due medical reasons I can’t work much. I changed my loan to IBR plan 3 years ago since my loan is still over $130,000 and my income is only $40,000. I am married and file separately even though my husband doesn’t make significantly more than me. I did save money in a U.S. Bank about $80,000 while I was working in the past and because we live modestly. My question is can my savings be touched by the loan? Can they request me to pay the loan since I have a savings even though I only make $40,000 a year. Is my savings safe? Do I qualify for the IBR?
Robert Farrington says
If you’re on IBR, re-certify your income based on what you’re currently making. They will lower your payments appropriately.
Second, your savings is fine, but if you do default, any future government payments can be taken (i.e. Social Security, Tax Refunds, etc.).
Finally, while not amazing, remember you get forgiveness on IBR after 25 years: IBR Loan Forgiveness.
JA says
Are there certain options that are more/less favorable for people with over $300K in student loan debt?
Robert Farrington says
It’s impossible to say. At that level, depending on your career, there are lots of options, but you should really sit down with a financial planner familiar with student loans to hash out the different approaches.
Maya says
Would there be any logical reason why spouses repayment amounts would be different on REPAYE if they’re based on income? My monthly payment is $225 while my spouses is $15. What would explain the drastic difference?
Robert Farrington says
Are you both on RePAYE? How long? When did you last certify your income (both of you)? What are your loan balances?
Amanda Voelker says
Thank you for this wonderful article. I am beginning to calm down a bit. I have read through all comments, but just want to verify one big question.
My husband and I are MFJ and are repaying my loans under IBR. I plan in filing seprately in 2018 (for 2017) due to him receiving raises every year and my payment increasing every year, which is killing us. We still live paycheck to paycheck still,because of the 2008 downfall and my husband being out of a job for 4years…lots of cc and medical debt to get out of still.
So my big question is if I change to married and seprately filing tax status, will they question what happend to my husband’s income? Or will they still want his tax douments since we used to file jointly? I just dont want to be in trouble with the feds.
Thank you fir your time,
Amanda
Robert Farrington says
Nope, if you file separately, you’ll be treated separately. However, realize that you may pay more in taxes, so do the math and make sure it makes sense.
Josh says
Very helpful article and thread! Thanks!
I will graduate in spring of 2019. I live in Michigan, I am married, and our second child is due in April. I plan to enroll in IBR and leverage PSLF. I have old loans and do not qualify for PAYE. My income will likely hover around $40,000, and the total of my loans will be about $42,000. My wife makes about $65,000 and still has some federal loans of her own, but considerably less than I will have (less than $15,000, I think). I believe she is on a standard repayment plan and intends to ride it out. We have been filing jointly but plan to begin filing separately to ease my repayment burden. These issues were both raised elsewhere in the thread, but I’d greatly appreciate clarification of how they will apply to my circumstances:
1) Since my repayment begins in 2019, do we need to file 2018 taxes separately to minimize my initial payments, or can we continue to file jointly for 2018 and still use IBR based on just my income, provided we file separately starting in 2019?
2) For the calculation of IBR payments when MFS, does it matter who claims the dependents on the tax returns? And does the spouse count? To clarify: There will be 4 people in my family. Provided that number doesn’t change, will my family size for repayment calculation purposes be 4? Or will it be 1 or 2 or 3 depending on how the dependents are claimed on the MFS returns?
Robert Farrington says
1. It’s better to file 2018 separate if possible (and makes tax sense) for your 2019 repayments. You can use just your income in 2019, but since you won’t use your tax return, you’ll use the alternative method, which relies on your gross pay, not your AGI. This means that your payment will be higher than if you file taxes separately (because if you use your taxes it uses your AGI).
2. For family size, you would claim 4. According to StudentLoans.gov (and the actual government code): For the purposes of repayment plans, your family size may be different from the number of exemptions you claim on your federal income tax return. You should always use the correct family size for your poverty line/discretionary income calculation.
Josh says
Thanks!
Ash says
Question:
I’m currently on IBR, working toward forgiveness program for non-profit. I have 8 more years.
However, I’m looking to get married and my fiancé makes much more than I do. Thus, it sounds as if we do married, filing separately and keep paying IBR, my payments shouldn’t change much and I can still qualify for forgiveness. Am I interpreting this correctly? Thank you!
Robert Farrington says
Yes, but you could pay more in taxes – so you would need to do the math and see which makes more financial sense for your situation.
Gadaffi says
Hi Robert,
Thanks for some wonderful information. I’ve about $150k in consolidated loans (subsidized and unsubsidized). I’m in PSLF and certify every year and already have 78 payments towards my 120 for PSLF. I’ve always been under IBR and my monthly payment is about $700. I did some calculation on REPAYE and I see that I can reduce my payments by almost $250 a month. However, I’m worried about the implications of switching. Here are my questions.
1. Will switching from IBR to REPAYE affect my already 78 certified payments towards PSLF?
2. I make about $115k now, but I expect my salary to increase to around $150k in the next 3 years. Could my future payments under REPAYE be bigger than IBR? I’m married but my wife doesn’t work.
3. Any other implications for switching?
Robert Farrington says
1. No, each payment is counted individually, so you’ll be fine there. However, the 1-2 payments during the switch might not count due to being in between repayment plans (i.e. forbearance). This is a *may*, not a guarantee.
2. Yes, it could rise. I don’t have the math in front of me, but it’s possible.
3. Biggest issue under RePAYE is your wife’s income. Only you can know if that’s an issue or not.
CG says
Hi, Robert! Thank you for this breakdown. It’s most helpful. My situation is a little different, and forgive me if I scrolled past a conversation that may have helped…
I make 50k and have 60k in loans. I am a moron who didn’t realize 9 years ago that if I had reconsolidated my non-direct loans (Stafford Subsidized and Unsubsidized) into direct loans, I could be forgiven under PSLF at the end of 2019, as I’ve been working all that time as a non-prof school teacher and have never missed or been late on a payment. Kicking myself, but I never knew. So I’m just now doing the consolidation, and I sent in all the paper work for the employer certification.
Meanwhile, my husband is unemployed right now (so no income), has 130k in loans and is just finishing his thesis to graduate soon. We’ve submitted a reconsolidation app for all his loans, too, and requested REPAYE for us both, as the projections for our monthly payments were comparatively low and we file taxes jointly. We have one child. We project that my husband will work in non-prof, too, and spend 10 years working toward PSLF.
He’ll have a job soon (we hope!), so his income MIGHT be as high as 50k, but we’re not there yet, and we don’t imagine he’ll make more.
Is REPAYE right for us? Am I definitely going to be sent back to “go” (work another 120 payments) to get my PSLF? We’re not locked into anything yet, as the Feds are evaluating our applications and will bounce it all back to our servicer for us to decide soon.
Any advice would be wonderful. Thank you!
Robert Farrington says
RePaye is probably the wrong choice if you file taxes married filing separately. It’s the only repayment plan that considers both your incomes no matter what. With your husband earning nothing, it won’t matter in year 1. But as he gains employment and earnings, you should probably look to change to IBR.
That being said, it also depends on taxes, so speak to an accountant and do the math to see if changing how you file increases taxes more than you save on your loans.
Sara says
Would you be able to do the math with examples of something substantially more…. say $250,000 in student loans? I’d love to see a more realistic amount.
Robert Farrington says
Hey Sara, not quite sure I follow. First, I want to level-set that $250,000 isn’t realistic – that’s rare. Please understand that when thinking about your loans.
Second, to do any math, you need to break it out like in the chart above. Who makes what? Who owes what?
Once you break it apart, you can see the differences that taxes and repayment plans play into it.
Darian Mock says
Great Article and hoping you can provide some guidance on my scenario.
My wife and I were married last year, she is a school teacher for a public school and has over $150k in student loan debt. She did not know she would qualify for the 10 year 120 payment loan forgiveness program (IBR) and had been in default and garnishment for a while when we first met. She has since rehabilitated all her loans and has successfully consolidated them in order to get on the IBR & forgiveness plan.
Based on her teacher’s salary, say in the $60k area, her payments were going to be in the $450/500 per month range. However, we did file jointly last year and together we earn over $250k and so the monthly payment was adjusted to $1600 or nearly 1/2 of her take home monthly–quite a difference.
If we move to a married filing separately scenario, will this help our situation and get her back to the $500/month plan–I suppose until we file for 2018 sometime in February ’19 would it be even up for consideration.
Thanks!
Robert Farrington says
Yes, it should definitely help as long as she is on IBR or PAYE (not RePAYE). However, you likely will pay much more in taxes, so make sure you or your accountant does the math. You’ll likely save $12,000 per year in loan payments, but what will your tax burden change?
Second, PSLF (public service loan forgiveness) is not IBR – there are two sets of paperwork. So make sure you file them both!
Finally, as a personal side note, you’re married! You should both be paying towards her loans to eliminate them. At $250k per year, you can eliminate her debt in 3-5 years if you work together. Now, if she is getting forgiveness, maximize forgiveness. But even then, you should never say “half her take home salary” when really it’s like 15% of your combined take home salary.
Nick says
Thanks, Robert – this is a great article.
I am in a somewhat similar situation to Darian above and could use your advice as well. Here are the relevant points:
– My wife and I have two kids under the age of 2 and have been doing Married Filing Separately since we got married a few years back (given her high amount of student loans – see below)
– I make 135k~ish each year
– My wife is a public school teacher (but not in a PSLF-eligible school) and was making about 55k~ish, but has been on maternity leave since September and will be until likely September 2019
– I have about 60k~ish in loans and pay about $350-400 per month on those, which is manageable
– My wife has about 131k~ish in loans and has been doing IBR for a few years, and because we do Married Filing Separately, she pays $0 each month – that will be the case I believe until like September 2019
– In looking at the numbers for MFS vs. MFJ, it doesn’t seem worth it to move to Married Filing Jointly, as my wife would likely be going from paying $0 per month and eventually having her loans forgiven to having to pay upwards of $800 per month (and not necessarily having her loans forgiven)
So, my question is – do you think it makes sense to continue to do Married Filing Separately, particularly if she is paying $0 per month? I’m assuming even though she is paying “0” each month it still functions as a “minimum” payment that would be credited in terms of forgiveness?
And also, what is the tax policy for forgiving loans? E.g., if my wife still had 100k in loans eventually forgiven, in the year it is forgiven, what would that look like in terms of our taxes/tax burden? What additional amount would we need to be ready to pay?
Thanks in advance for your thoughts.
Best,
Nick
Robert Farrington says
First, all public school teachers and employees are eligible for PSLF. What makes you think she isn’t? Make sure you read our guide: PSLF Guide.
If you didn’t realize this, it’s essential that she goes back and qualifies all her past payments. The program started in 2007, and you didn’t say how long she’s been paying, but it sounds like she could be well on her way to forgiveness!
As for the $0 payment, yes, if that’s her payment, that qualifies as a payment. I would keep this as it sounds affordable!
Finally, for loan forgiveness, PSLF is tax free (and she should qualify for this).
IBR forgiveness is taxable. Here’s a full guide to how that works: Student Loans and Insolvency.
Nick says
Thanks, Robert. I think my understanding of PSLF previously was that you had to do the Standard payment plan of a full amount each month for 10 years, which wouldn’t have been tenable, but that doesn’t look to be the case.
In your guide, you mention: “Private student loans are not eligible for loan forgiveness. PSLF is only a program for student loans of the Federal Direct Loans type. These include:
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans
Direct Consolidation Loans”
Most of her fed loans are Direct Sub and Unsub, but she does have some DIRECT PLUS GRADUATE. Would those be eligible as well?
If so, it sounds like we need to get her to submit the Employment Certification form for Public Service Loan Forgiveness ASAP. She has only been a teacher for a few years, but if she can indeed stay on IBR and have some months already be paid towards this (as well as future years), then I think that and continuing to do MFS would be the answers we were looking for.
Thanks again for all your help!
Robert Farrington says
Yes, her Direct PLUS loans count. And every payment that meets the three requirements (even from the past if she can certify them), can count:
1. Qualifying Loans (all of those loans count) – DO NOT EVER re-consolidate her loans. That resets the clock
2. Qualifying Repayment Plan – IBR counts, even with a $0/mo payment
3. Qualifying Employment – this will take some work if it’s with different employers, but she needs to go back and get certifications for all her past employment
Nick says
That all makes sense. Last question – she also has about 13k in FFEL STAFFORD SUBSIDIZED loans. Those are not eligible for PSLF, correct?
If not, then it doesn’t make sense for us to consolidate (given all of her other loans are already consolidated through Nelnet) and we would just then apply to PSLF.
Robert Farrington says
Correct, that FFEL loan is not eligible for PSLF. You can consolidate just that single loan, into a new loan, and make it qualifying. But her 120 payment timeline will start when the consolidation is finished.
If you proceed with that route, do the paper consolidation application, keep accurate copies, and ensure you only write that single loan down. You don’t want to accidentally consolidate the other loans.
Nick says
Your last response makes sense as well, Robert.
Thanks again!
Kasie Carlson says
Robert,
I tried reading through it all, forgive me if I missed a similar situation
I am a first year teacher, hoping to qualify for PSLF in 9 years. I am married and for the 2017 year my husband and I filled jointly. When my student loans went into repayment, last year, our only option was the standard repayment plan, YIKES! we are currently paying almost 700 dollars a month, on JUST my student loans alone. I make about 30k a year and he is averaging about 45k a year.
1. Would you recomend filing separately for 2018?
2. What would be our next step to qualify for a different repayment plan on my loans?
3. We were hoping to get a mortgage, but are struggling, would any of this effect our chances?
THANK YOU
Robert Farrington says
First, if you are on the standard plan on $75k per year, your loan balance must not be that high. If you switch plans, will you even have a balance left to forgive?
1. Maybe, this is a tax question and a loan question. Talk to your tax planner to help you figure out the math on the implications of this.
2. If you file MFS for 2018, you would certify you income for an income-driven repayment plan using just your tax return. You can do this as soon as your return is processed and in the system.
3. Your loan debt will impact your chances greatly no matter what you do for taxes. You can read this: Getting a Mortgage With Student Loan Debt. As a side note, I think for most people, renting really is better than owning, IF you can save as well.
Bert says
Hello, Robert,
My wife and I are trying to decide if we should file MFS for 2018 and change some of my wife’s IBR loans over to PAYE in 2019. In May 2018, my wife decided to quit her part-time job (she earned around $12k to that point in in the year) to spend more time at home with our 4 children. She has $40k in student loans, half of which are a FFEL consolidation loan (not eligible for PAYE), the other half of which are direct loans (eligible for PAYE). I could be wrong, but I don’t anticipate the taxes on the $12k to play a long-term role in the decision.
Is it possible (and advisable) to have some of her loans still on the IBR plan and some on the PAYE plan? We’re living on my 100k gross annual income and she’s not earning anything, so would that essentially halve the monthly payment for her loans since the PAYE payment due would be $0? If so, could this arrangement be sustainable until the loans that are on PAYE are forgiven?
I have $95k of my own in student loans that we’re paying back through IBR. $35k of those are eligible for PAYE (or REPAYE – but that doesn’t seem to be the right strategy based on your article). We’re also trying to decide whether or not to leave these loans in the IBR status quo or change them to PAYE also… Recommendations?
Thanks.
Robert Farrington says
Hey Bert,
Thanks for reaching out. There’s no easy answer here because you have to compare the higher taxes with the lower student loan payments.
On the surface, it sounds like MFS would help you both with your loan payments. Do either of you work in public service? That could also be a big help.
You can select repayment plans for each loan, so yes, you could do half IBR and half PAYE. And if her payments are $0, that could stay that way for the 20 years until forgiveness… The risk is taxes at the end. Her $40k in loans will grow to maybe $80-100k by the time they are forgiven, and your tax will then be $20k or more… That’s a big chunk of change.
Make sure you read this: Student Loans and Insolvency.
Colt says
I have been working towards PSLF forgiveness for roughly 3 years under the PAYE payment plan. My wife and I have been filing our taxes “married filing spearerately” because it appeared that we made out ahead with this method. My question: Would it be possible to file jointly but then recerifity my PAYE plan each year using a paystub INSTEAD of submitting my tax return? Seems like this could be a way of getting the tax benefits of filing jointly and also keeping my loan payments low.
Robert Farrington says
No, two things.
1. You’d be lying on your Federal certification form when you say you reasonably don’t have access to your wife’s income. It’s on your joint tax return.
2. When you use paychecks to certify, your payments are naturally higher because they always use your gross pay, not net. Only the tax return gets you an accurately low payment based on AGI.
Colt says
Ok thanks. My thought with sending in a paycheck is that I have paychecks I could use that don’t show the normal OT I get. So for example, I could send in a check showing a relatively low gross pay when compared to my normal rate.
Robert Farrington says
You have to submit a stub that’s within 90 days old. Also, you must share how often you get paid.
Jillian says
Hi Robert,
Thank you for the helpful article! I have about $37,000 in student loans. I am on the IBR and working towards PSLF, however, because my husband and I filed MFJ for the first time last year (we bought a house in 2017) my monthly payments quadroupled when I decertified for 2019.
I am interested in MFS but don’t know how it will effect our tax situation. I know we will have to go speak with a CPA.
I see in the thread that you spoke about filing via paper numerous times. What are the benefits of filing via paper? Also, since I’ve already recertified am I eligible to send in another paper application?
Robert Farrington says
When you file online, the risk is very high your spouses income will be included, especially if you use the IRS Tax Tool. It’s better to file a paper application, and send it certified mail (for tracking).
I love having the documentation and paper trail with certified mail and return receipt when sending in these forms. It’s CYA when dealing with the loan servicers.
Jillian says
Even if I submit a paper application, will they not take into consideration that I file MFJ and request my husbands income as well? I am just so scared to do anything that may be fishy or catch up to me later with even greater consequences.
Robert Farrington says
They won’t if you don’t going forward. Tax years are always backwards, so by filing today you’re certifying today’s income. But it could be a problem if you only use your income but then file jointly in the future.
Marisol says
Thank you for your article. I had a couple of questions. What do you mean by file paper? Do you mean file your income taxes by paper and certified mail? I am getting married in June. I have student loan debt of 190k and my significant other has student loan debt of 100k. we both work in non profit so we are annually completing PSLF forms. I make 65k a year and he makes about 55k a year. Would you recommend filing seperately for this circumstance?
Robert Farrington says
File paper – send in your Income-Driven Repayment Plan Application on paper certified mail (versus doing it online at StudentLoans.gov).
I can’t tell you the best scenario, it’s based on your repayment plan and your tax situation. You sound like a candidate, but you need to run the numbers.
Lisa H. says
Hi Robert!
First of all, thank you for such an informative read. I have been struggling with how to proceed on my student loans, and I hope you can help. I graduated with my Masters last year and consolidated all of my loans in March of 2018. I am currently on the REPAYE plan and PSLF with FedLoan Servicing. My payment is currently $385 considering both mine and my husband’s income, as we filed our taxes jointly last year. I would like to lower my payment and have more of my loan forgiven, so I started doing some research on my options. We filed MFS this year. My AGI is $40,000 and his is $64,000. I also claimed my daughter. When I put those numbers in on the student loan site, it looks like I qualify for the PAYE plan with a payment of $79.
My questions are:
1. I am due to recertify under my REPAYE plan. I know that this will take into account my husband’s income, so do I request a plan change in lieu of recertifying?
2. The online form asks me if I am married, and when I say yes it asks if I am currently separated from my spouse. Do I need to check that I am since we filed MFS? Will not checking that have any impact on changing from REPAYE to PAYE?
3. Is there anything else negative that I need to take into consideration? I already crunched the numbers and it made much more sense to file MFS than MFJ.
Thank you so much for your time.
Lisa
Robert Farrington says
1. Yes, you apply for the new repayment plan in-lieu of certifying your income.
2. Never use the online form. Only do a paper application. Select married but separate on Question 7 as that is what you told the IRS by filing MFS.
3. Realize that if you change your repayment plan, your forgiveness clock resets (looks like by just a year) and any interest that you had outstanding due to potential negative amortization capitalizes.
Lisa H. says
Thank you so much for the fast response. I have one follow up question (Sorry to be such a pain!).
I have printed out the paper copy, and am still confused by question 7. I can either select “Married but separated” and skip to item 11 as a married treated as single, or I can select Married, select “No” on question 10, and then go to the section 4D as a married borrower filing separately.
Which is the best path to follow? It looks like if I follow the path to section 4D, I will also have to submit my husband’s tax transcript. If I do this, will they make me stay in REPAYE and use both of our income, or can I still switch to PAYE on only my income?
Thank you again for being so incredibly helpful!
Lisa
Robert Farrington says
Yes! Sorry do 4D.
But on Question 1/2, make sure you indicate you are changing your repayment plan.
jeremy h says
Thank you, Robert, for this great article. I am a tax preparer and I have many conversations with clients regarding the benefits/consequences of Married Filing Separately (MFS) vs. Married Filing Jointly (MFJ). Today I had a client mention filing as MFS in order to reduce their monthly student loan payments. In the beginning I couldn’t see the benefit. I’m thankful I found this article and I’m thankful my client brought the various repayment calculations to my attention. In this situation using (PAYE) it turned out that the taxpayer’s annual student loan payments were reduced by $3,000 and the additional annual federal income tax was only $120 when electing to file as MFS.
In most cases, solely from the tax perspective, Married Filing Jointly is more beneficial. However, with the various student loan interest repayment options that are now available to borrowers we must look at various repayment options in addition to the taxpayers’ filing status (MFS vs. MFJ). This has been discussed throughout the comments (IBR vs. PAYE vs. RePAYE).
This has also been complicated by the 2018 tax law changes. The bottom line is that Student Loan Debt is not going to magically disappear and neither is a taxpayers’ tax liability.
There is one error in the example presented in this article when calculating taxable income for MFS vs. MFJ. When taxpayers elect the MFS filing status there is no deduction for Student Loan Interest regardless of the combined taxpayers’ AGI or the individual taxpayer’s AGI.
If the taxpayers elect MFS and their combined AGI is $25,000 or $134,999 the Student Loan Interest Deduction is $0.
If the taxpayers elect MFJ and their combined AGI is $25,000 or $135,000 the Student Loan Interest Deduction could be a maximum of $2,500.
For MFJ filers with AGI greater than $135,000 the Student Loan Interest Deduction begins to “phase out”. Once MFJ filers reach an AGI $165,000 the Student Loan Interest Deduction is completely phased out and the deduction is $0.
In the example included in the article “Person A” receives a Student Loan Interest Deduction of $2,000 when electing to file MFS. The Student Loan Interest Deduction for “Person A” when electing to file MFS should be $0.
Again, thank you for the great topic.
Jeremy
Robert Farrington says
Thanks for the catch! Love CPA readers. Updated the math to reflect.
KELLY says
My husband has been accepted to graduate school, but we have not yet taken out student loans as he does not start until the Fall. We currently have no student loans. He will be working throughout his schooling. Do we need to worry about filing taxes MFS now or do we just need to worry about this after his schooling his complete and we begin paying on his student loans. We have 2 children and both have an income of ~$60K, so would definitely lose out on some tax breaks if we file taxes MFS at this time.
Thanks for your expertise!
Robert Farrington says
You only need to worry about it when you start repayment.
Terri says
Really well written article. Truely appreciate.
I have a strange question that might fall more under an opinion but figured I’d throw it out there.
I am about a year into PSLF REPAYE payments on my 63k in loans. I currently make about 55k-59k a year and my fiance makes about 65k with no loans.
While the engagement is new our relationship is not having been together for 8 years and essentially living like a married couple (without the tax benefits). Since we wouldn’t even be getting those benefits because of my loans for the next 9 years, is the official title (and legal perks) worth the extra cost of having to file married.
Currently I am estimated to pay less than 20k by the end of my forgiveness if I stayed “single” if we filed married but separate it would come out to about 35k. That’s the cost of the wedding right there too!
We already have had some things in place to simulate the commitment like living together, beneficiarys, emergency contacts and we have discussed purchasing a house as well which is our larger priority to a wedding anyway.
Again I know it’s a strange question but curious for some thoughts and is it as financially sound as I feel it is? Or at the same time how long is too long to delay the status, like when kids come into the picture?
Robert Farrington says
RePAYE is not eligible for this – only IBR or PAYE. RePAYE always uses your combined income regardless of filing status.
To be eligible, you’d need to change plans, which you capitalize any outstanding interest and also cause you to miss 1-3 qualifying payments.
The interest isn’t a big deal because you’re hoping for forgiveness in 9 years – and that can be forgiven. But… you also delay forgiveness for 1-3 payments you had to make (which is just another added cost).
So, it’s not a bad plan, but it’s not a great plan. If you had a crystal ball, everything would be easier to know, but you can’t.
I would suggest continuing down your current path as long as possible until something else becomes more clear.
Josh says
I’m in a situation. My wife has to consolidate her student loan debt to get them out of default, due to a variable of errors she rehabilitated her loans not knowing there were multiple servicers and they double defaulted. Anyways, we are now married and I earn $51-$60k a year and have $44,000 student debt that’s been in the IBR plan for 7 years. She’s required to make 3 payments to her loans, then they’ll be eligible for consolidation according to her servicer and I’ve also spoken with Default Resolution Group and Ombudsman. I didn’t like finding out that they all work for the Dept of Education (one common interest). Anyways, she has $70,000 of student debt and currently earns $34,000. We have 4 children. In your opinion, is our best plan of action to file separately and get her loans under the I.B.R. Plan as well? There’s conflicting articles online about REPAYE saying it takes both spouses AGI into consideration , but, that it also takes both spouses student loans into consideration. We currently earned $80k combined this year and we’ll be fortunate if we ever earn as much as $130k-$140k combined. Also, I work for a federal agency so I am qualified for the PSLF once I consolidate my loans into direct federal loans. My wife’s working on gaining a good income and employment at a agency such as my own so then she would become eligible for PSLF. I read online that REPAYE would be best in our situation and then I find conflicting articles saying that our payments will be higher than if we decided to go MFS and choose the income based repayment route. Also, if we file separately, If we each claim two kids does that effect how we establish our family size for the repayment plan forms? Thank you so much for for your time.
Robert Farrington says
RePAYE always uses your combined AGI regardless of filing status (and yes, it does take into consideration both your loans). Use the repayment estimator on StudentLoans.gov as the definitive answer to this: Repayment Estimator.
The question of MFJ and MFS then becomes a tax question. You have to be on IBR or PAYE (not REPAYE), and then you have to assess your taxes compared to the changes to your repayment plan – just like the math in the article above.
Rachel says
Hey Robert!
Great article! I’m in the process of resubmitting my IDR application and I’m confused about one section. My husband and I got married in October of last year. We have filed our taxes married but separate for 2018. When I fill out the IDR form and go to section 4D (for married but separate filers) it asks for my husbands tax return anyway. I’m switching to the PAYE plan, which doesn’t use his income when deciding my payments, so I don’t understand why I have to submit his tax return. Am I missing something here? Am I supposed to send his tax return in? Any help you can provide is greatly appreciated!
Thank you!
Robert Farrington says
You would file #7 – married. Then #10, NO. Then jump to 4D #17 per the instructions.
You still submit his loan and income information, it’s the requirement of the Department of Education.
Shulamith Nosek says
Hello,
I’m married-filing-jointly and on REPAYE, and just re-certified my REPAYE. For the two years since we’ve been married, my husband has also carried loan debt BUT he is also still in school, so in deferment.
My monthly payment went up significantly this year and I learned that it’s because they did not factor his loans into the equation.
I’m waiting on a review of the calculations, but I’m wondering–
Is it possible the payment was wrong last year and is correct this year? Meaning– if my spouse’s loans are in deferment, do I still only pay my portion of the 10% of discretionary income, based on my portion of the loans held between us? Or do I pay the entire 10% of discretionary income towards my loans while his are in deferment?
Robert Farrington says
Use the calculator here and see: Repayment Estimator.
David says
Great article and threads. My wife and I both owe about 150000 a piece. We are filing married filing separately. She makes about 12000 per year and I about 90000. I think this is the perfect situation for ibr. In fact I’m in my 70s and decided to stay in school to avoid paying mine back under senior tuition waiver plan available for any senior in college in state schools. I guess that is why I now have 7 degrees and four masters and when I die it is forgiven. I still did not like providing my return when we filed but am trusting the system. Thanks for the article.
Jean says
Thank you for sharing all this knowledge! Here is a scenario that is not discussed above: I make $80K/year and have $315K in student loan debt, some loans in IBR and some in PAYE. My husband has no student loans and usually makes under $20K/year, but in 2018 he also had a capital gain of $110K. We have been filing jointly, but I am considering filing separately for 2018 because of the income spike. I’m fairly certain filing separately would save money overall, even in a community property state, BUT: Do we then need to keep filing separately forever, even if this is an unusual income spike for my husband? I saw in your reply to Jillian above that it could be a problem to use only her income and then go back to filing jointly later. Does that mean I shouldn’t jump back and forth between MFJ and MFS based on whether or not my husband had a large income in that year? Why–does the loan servicer see the prior years’ income of my husband if we start filing jointly again or something? Thank you!
Robert Farrington says
You should speak with a tax professional is this is 95% a tax question and not much of a student loan question.
Bernie Slome says
my daughter-in-law is on PAYE, however, last year she did not work at all. Thus there is no W2. Should she and her husband file jointly or separately?
Robert Farrington says
That’s a tax question versus a loan question. Read the article and run the two scenarios above to see which is better for her/them.
MK says
Hello – thank you for this resource!
Question for you – Husband makes $400K / year, and I’ll be making about $150K/year. I’ve got $360K in student loans. Our tax benefit with MFJ is so great that MFS is very detrimental financially, but filing jointly under IBR is hugely detrimental also since they would calculate IBR payments off our combined income. In which case we would end up losing forgivness b/c of his large salary -and all the interest I allowed to build up will have been for nothing.
I’d always planned to do PSLF and slowly chip away at this with my salary until forgiveness, and didnt know about the inclusion of spouse income when I planned this (and allowed all this interest to build up while single). My loans and my managment of them are a source of marital issues, and I’m wondering if that is reason enough that I can check the box “I cannot reasonably access my spouse’s income” while still filing jointly, and give them my personal pay stub. Have you heard of repurcussions of checking this box? What qualifies as not reasonably able to acces a spouses income? Is martial issues enough?
Sorry for the very long-winded question!
Thanks in advance
Robert Farrington says
Have you heard of repercussions of checking this box?
No, but you are technically lying and it could disqualify you from forgiveness and you could face fines and even jail time. Never seen it happen, but it’s the consequence of lying on a Federal form.
What qualifies as not reasonably able to access a spouses income? Is martial issues enough?
No, marriage issues isn’t enough. The law basically says the “requirement was meant to protect people who file their tax returns separately but are estranged from their spouse”. This is usually in cases of pending separation or divorce. Usually with issues like domestic violence.
MK says
Guess thats my answer – thank you so much! I think I speak for everyone when I say your resources and help are greatly appreciated.
Amanda Voeker says
Hi–I just got finished filing MFS and am now looking to fill out the IDR plan request form to have my payment recalculated based on my income only. I saw your comments on the question from Feb 20, 2019 to select married, but separated in #7 and this will forego having to submit any income docs for my husband (section 4D entirely). Is this technically the right thing to do–even though I am not separated? Section 4D is titled: “Income info for married borrowers filing separately”
I am not sure how else I can get away with not having to submit his documents.
It does say in #20 that “your spouses’s income docs will only be used if you are on or placed on the REPAYE plan”. Is this statement safe to assume that they will not take his income into consideration (I am not on REPAYE).
Thanks!
Amanda
Robert Farrington says
You would file #7 – married. Then #10, NO. Then jump to 4D #17 per the instructions.
If you don’t choose RePAYE, then his income won’t be used at all.
Amanda Voeker says
Thank you for your guidance with my questions.
So considering I am not on REPAYE, can I get by without sending in his income docs?
Also, according to what I select, it wants me to send in his tax return (#19–No). However, he is a new business owner and has an extension so his return will not be complete until Sept 2019. Based on the answers I select in section 4D, it skips over going to section 5 (where it instructs me on other forms of income docs) and has me going right to section 6.
Thanks again.
Amanda
Robert Farrington says
No, you still need to send his income documentation. If you cannot reasonably access it or provide it (maybe DV issues), you want to choose Married, cannot reasonably access it.
The tax return can be last years if he hasn’t filed this years yet.
Amanda Voelker says
I get to section 6 because of my answer selections–so the problem is that my husband won’t file until this fall for 2018. His tax return from 2017 was filed jointly with mine, so I need to avoid sending that in because it is a discrepancy since I will be sending in my 2018 married-single return.
Can I send in my married-single 2018 tax return and his current pay stub with a note stating that his 2018 return isn’t available yet?
Thanks again for your help.
Amanda Voeker says
I can reasonably access it through providing his paystubs, so I don’t want to check that off. We are not going through DV.
I can’t send in his last year’s return because last year we filed jointly. Or can I? Will that look strange? I send in my 2018 MFS return for me and then send in our 2017 MFJ income for his proof? I guess since they will not use the return it shouldn’t matter?
Hillary says
I recently got married last month, but was considered single on my taxes last year. I am currently on an IBR plan but now is the time where I resubmit my information. Do I choose single as in 2018 I was single and it is based off of my 2018 income?
And next year I will choose married as we will be filing together.
I cannot find anything about this whatsoever.
Robert Farrington says
You should choose married because when you certify your income, you’re married filing jointly.
Matthew says
My fiancé is currently on the repaye program and has a lot of student loan debt. In order to avoid my income being considered, instead of her switching to PAYE, why can’t i just simply say that i refuse to file taxes jointly with my wife? How can they force us to file taxes jointly and force me to disclose my income?
Robert Farrington says
The law for RePAYE says that regardless of filing status, both spouses income must be included. How can they force you? That’s what the law says.
However, for both IBR and PAYE, you are allowed to file taxes separately to just use one income.
Darlyn Esponoza says
Hello,
My spouse is a few years away from loan forgiveness through 9 years of IBR and PSLF.
We have filed separately for the past 5 years and saved over $20,000 in loan payments using this approach.
My accountant has advised that i should re-file the last 3 years worth of taxes to “married, filing jointly” to reclaim the student loan interest tax deduction. He claims that the loan company has no mechanism to retroactively adjust my 2016 or 2017 income based repayment.
So, is this a viable strategy? Can i lock in a repayment rate while MFS and then refile taxes to MFJ after my annual rectification to maximize tax returns? Could this put the loan forgiveness in jeopardy
Robert Farrington says
I’ve heard this come up before, and while your account is correct they don’t retroactively adjust payments, you are also now lying on a Federal form/application, which is a crime. So I don’t recommend your pursue this path. While I don’t know if they could change your loan forgiveness, the penalty is a $20,000 fine and up to five years in jail for fraud on student loan and financial aid applications.
Also note – PSLF is 10 years/120 payments. If you’re 9 years in and haven’t missed anything, you’re not a few years away – you’re a few months away!
John Riddle says
Amazing article, thank you Robert, I am praying you still answer questions here! After reading it and scouring the comments, I still have a brief question(s) that I could not find clear answers to anywhere else or from calling my loan servicer, and no accountants I have met know this either unfortunately:
Background: I am considering switching from RePAYE to PAYE (switching from MFJ to MFS to lower the monthly payment). I have about 370k in student loans (along with other debts unfortunately), and currently benefit from the RePAYE interest getting cut in half. Due to unforeseen circumstances, my spouse is now becoming the high earner (~100-150k/yr, me ~0-30k/yr) and it may remain that way, and she has no student loan debt. I do not currently plan on PSLF (partly due to my skepticism from hearing current people trying to claim it for the first time having difficulty and needing to attempt legal action, though I may still try for it should I switch to working in a qualifying sector).
1) My question is regarding the non-PSLF forgiveness periods- if I switch from RePAYE (25 yr forgiveness, taxed) to PAYE (20 yr forgiveness, taxed), does that reset the clock? My loan servicer (Navient) told me no, the clock does not reset, that it would still count the two years I was on RePAYE towards the PAYE forgiveness term. For example, if I have been on RePAYE for 2 years (23 years remaining), and switch to PAYE, will it now be forgiven in 18 years?
2) Less importantly, I am also asking because after my first year of repayment (sidenote: was on $0/mo payments since I was in school the year prior my tax returns had no income) I was slightly late recertifying on accident, but had no trouble continuing RePAYE, at which point my interest capitalized (ouch!) but I was told that first year still counted when I spoke with the loan servicer representative.
I have gotten conflicting information from generally reliable sources on these topics.
3) I was also concerned if laws change in the future (I also read your article on this) if this would impact my ability to switch repayement plans, if one ceases to exist, or if it will always be an option based on the initial agreements from when I took out the loan. I am asking because there is a chance that in a number of years I could end up being the primary earner again that could again potentially make RePAYE a better option for the interest subsidy.
Thank you so much again, and sorry for the long post, any insight in general would be highly appreciated. I also wanted to thank you so much for the information on insolvency, since in my case 20 years-ish from now I may be looking at around 500k-700k being forgiven, depending on RePAYE vs PAYE, and potentially owing the IRS was a concern I have been wanting a long term plan for. I am hoping I asked clearly, basically I am weighing the pros of PAYE MFS with 20yr forgiveness period, with the REPAYE MFJ with interest rate subsidy and 25yr forgiveness. I have used all the calculators. Thanks!!!!
Robert Farrington says
1. The forgiveness window does NOT reset. The only thing that resets it would be re-consolidating your loans – because when you change your loans, your record is wiped.
2. That’s correct. You likely slid into a deferment or forbearance, which doesn’t reset the clock.
3. Laws could change. But in all past cases of the rules changing, everyone was grandfathered in. Basically it only impacts new borrowers. I would expect the same thing to happen.
JOHN RISERVATO says
Hi Robert,
I am a CPA and I have been trying to get a reliable answer for my situation. First some background. My wife currently has loans on an IBR program and we are forced to file separately. I make more money then her and if we filed jointly, her payment would be way too high where filing separately makes sense. That being said, is there anything against me filing an amended return each year for the prior year once she gets her re-certification out of the way? For example, her re-certification period is in June. If I file the 2019 return MFS in April and she uses that for the 2020 re-certification in June, I would like to amend the 2017 return to MFJ in July.
1) Does the loan company need to have a copy of the amended return? My worry is that when the 25 year non-public loan forgiveness period comes due, they will go back and review past years and not qualify something and we will be stuck with having to pay off the entire balance.
2) Do they do a review off all returns to make sure the income lines up? This may sound like me being paranoid, I just don’t want to be on the hook for having to pay off a large balance in the future because I wanted to get my money back that was left on the table now
Robert Farrington says
The big thing against you amending your return after filing your IDR application is you’re effectively committing fraud on your student loans for the purpose of lowering your payment. You’re knowingly submitting an IDR application with the plan to amend your tax filing status (thus making your IDR application incorrect).
Now, do they check? I’ve never heard of it happening before specifically for amending your tax return, but it’s definitely happened for people lying about other aspects of their IDR application.
The penalties are harsh too – up to 5 years in prison and a $20,000 fine (or both) – for each form you falsify.
So, my worry for you wouldn’t be that you don’t get your loans forgiven. My worry for you is that you go to jail.
John says
I hear what you are saying, thank you for providing me with an answer I really think it is unfortunate that married couples in general have to be punished by this. Single status does not have this problem.
Joyce Mills says
I recently re-certified my Income Driven Repayment plan on my parent plus loan. Because my husband retired last year, I was able to check the box about income significantly changing and the payment was very manageable. On our taxes this year, we show a significant gain due to a loan on his 401k being paid off and shown as income. This was not really income, so now my IDR plan gave me a payment that is 5 x what I was paying and there’s no way I can pay that! What should I do? Thank you.
Robert Farrington says
Yes, re-certify and DON’T use your tax return – just use your paystubs. This will be slightly higher than normal (because it will use your gross vs. net income), but will still save you.
Sam says
This is a very helpful post.
However one thing concerns me.
Here’s the situation
Husband loan 65000 (working toward pslf)
Spouse loan 0
No kids
Filed our taxes jointly for 2018 (but we want to file separately for 2019 for the loan situation. We don’t save anything at all whether we file separate or joint as per Turbotax)
When he talked to the fedloan servicing, they said, we can’t put MFS since we have to go off of the current return & sent us a bill of 700$ a month which we cant afford so they put his account on hold for 60 days.
1) Now if we start PAYE with MFJ, can we still change it next year to MFS (after we file our taxes separately) & the monthly payment will go down? or will they still add my income to it when he re-certifies regardless of how we file?
2) When the question is asked “Do you have access to your spouse’s income?”
Is he supposed to say “yes”. He is not in my checking/savings accounts & technically he has no access to my income. If i don’t buy grocery & don’t pay bills, there is no way he can access my income to do so. So does he have access to my income then? Maybe if he put “No” will the payment be lower under PAYE?
3) If recertification can reduce his monthly payment, can he re-certify as soon as we do our tax return in feb or does he have to wait a whole year to change that information?
I don’t want him to sign up for PAYE until we have a clear answer that the payment will go down by next year once he re-certifies with MFS.
I hope you will have some answers for us. We are literally up at 1 am discussing this & I having no student loan should be studying instead of worrying about this! 😭😭
Robert Farrington says
1. PAYE allows you to use MFS. You would re-certify early. If you’re not on a payment plan now, and are enrolling in PAYE for the first time, you can start at MFS. Your payment would then go down to whatever is calculated based on his income.
2. You would select “Married, but separated”. Skip to question 11.
3. He can re-certify his income as soon as it changed or your tax filing changed. In Box 1, you select you are submitting early to have your payment recalculated.
You can get specific clarity here on the payment: Repayment Estimator.
sam says
Thank you so much for replying!
1) So on the form we select MFS even though for 2018 tax we filed MFJ? And the tax return we will submit will be a joint return as well?
2) But since we’re not separated isn’t that false on the form? We’ll be filing married filing separately in feb 2020 which is just a few months away now. Is it a good idea to get deference until then, so we can start PAYE with MFS?
3) Will they calculate his monthly payment only based on 2019 tax return only?
What if he finds a better job by feb, wont the payment be higher based on the job? or will they just go off of tax returns for 2019?
Chris says
I just applied for a REPAYE plan because my husband did file jointly. Previously under the IBR my payment was too high, so I applied for REPAYE.
The application ask for how many children do you support and how many excluding children/spouse do you support living with you. I have 3 children I support and 1 other person who lives with me that I support (more than half of income).
In your opinion or your knowledge do those numbers play a major factor into lowering the monthly payment? I also hate the fact that other bills are not considered when calculating monthly payments. So not fair!
Robert Farrington says
Yes, the number of dependents you claim adjusts your discretionary income, which impacts your loan payments. Check this out: Discretionary Income Calculator.
Van says
Thanks for your generous attention to the comments. I’m on REPAYE and my payments went up a lot after getting married so I’m considering switching to PAYE / IBR so we can file separately and report my income only during recertification next year. With respect to the loan payments only (not considering any other potential tax savings in other areas) do you have any sense of what’s likely to be better?
(1) Reporting $225,000 combined AGI on REPAYE
(2) Reporting $75,000 solo AGI on PAYE or IBR
Van says
…further to my question above, using the StudentLoans.gov calculator my payments under REPAYE are estimated at between $1,500-1,800/month for 42 months (that’s what remains of the 120-month term towards PSLF), whereas it estimates $400-750 under PAYE or IBR for a full 120 months. Shouldn’t I be able to switch to PAYE / IBR (with those lower estimated payments) but continue for the 42 months only (as opposed to another 120)? Is there a reason that the results display 120 months for the latter two options? Many thanks.
Robert Farrington says
I’m assuming you’re saying 120 because you’re talking about Public Service Loan Forgiveness?
If so, switching from REPAYE to IBR/PAYE doesn’t change your qualifying payments – as long as you don’t consolidate or change the loans. The results are assuming you’re starting fresh with repayment, not from 42 qualifying payments in.
If you’re not getting PSLF, then you’re either paying the loans off, or at the end of the payment term.
Mo Os says
I’m following up on a question asked some time ago. Spouse and I are married filing separately. Recently however, on our IBR plan for re-certification they required us to include each other’s tax transcript to be automatically pulled from the IRS site. Then they required that we both co-sign on each others’ IBR re-certification.
What gives? Why are they doing this now? Are they combining our incomes regardless of the rules now. Is this now the case with all the plans now including the IBR and PAYE plans now?
Something is fishy here.
Try this online and in paper form and you will see that you can’t bypass this.
Robert Farrington says
You’re not “cosigning”. Each loan is still your individual loan. They’ve always done this, and even if you file separately, you still need to report both spouse’s income. However, only your income will be included (unless you opt for RePAYE).
However, it doesn’t impact your loan repayment amount.
Lucille says
Robert, this thread has been super helpful! I may have missed something though.
I am on PSLF and just got married this past November. I am contemplating whether I should file MFJ or MFS.
It sounds like if I file MFS then I don’t have to share my husband’s income and my payment is based on my income only but I’m not able to take advantage of student loan interest deduction.
However, I also read that if you file MFJ then we can both claim the student loan deductions and his student loan debt would be taken into account in my IBR payment.
My questions are:
1. If I file MFS I see that you advise to send in paper form but Fedloan allows you to scan in documents. Would this be the same if I fill out paper form and scan in? I assume then I would attach pay stub, as well?
2. If I file MJS, I make 55k and have $50 k in loans those PSLF and my husband will make about 68k and has debt 24k. Do you think my payment would significantly increase with his income or how they weigh his loans?
I’m trying to figure out what is going to be the bigger benefit.
Robert Farrington says
1. Yes, it’s the same.
2. Only you can figure it out here: Student loan repayment estimator.
Lucille says
So with IBR taking into account his debt it may male a difference? I will use that link. Thanks!
Ember says
Hi! I have enjoyed reading the responses but have a question. I have been in the Federal Loan Forgiveness program and have about 5 years left of payments. My husband and I have always filed separately because he makes considerably more than me. Last year, I submitted the re certification paperwork and called them because their married filing separately question about having reasonable access to his income threw me. So they had me include his income even though we file separately and my monthly payment more than tripled. I’ve seen you suggest sending the paper form in instead of online. Will that bypass that issue? Or do I still have to say I have reasonable access to his income even though we file separately?
Robert Farrington says
If you look at the latest form (Expiration 8/2021), question 7 – select “Married but Separated”. You are treated as single. Just follow the directions.