Married student loan borrowers coudl see a welcome decrease in their monthly payments due to a recent adjustment in federal policy concerning income-driven repayment (IDR) plans. This change addresses how spousal income is considered in payment calculations, offering potential savings for those filing taxes separately.

The ripple effect

• National Credit Scores: Delinquencies on student loans, held by more than 40 million americans, are contributing to a decline in national credit scores.
• Economic Burden: The Biden governance’s efforts to ease student debt have faced challenges, making this policy reversal a significant progress for married borrowers.

Decoding the Policy Shift

The Department of Education has clarified its stance on spousal income in IDR plan calculations, including plans like IBR, PAYE, and ICR. Here’s what borrowers need to know:

• Separate Filings: If borrowers file taxes separately from their spouse, only their individual income will be considered for payment calculations.
• Alignment with Statutes: This correction aligns with federal statutes,preventing unexpected payment increases for married borrowers.
• Potential Payment Reduction: Some borrowers may experience lower monthly bills due to changes in how family size is defined.

Following a court injunction against the SAVE plan, family size calculations now revert to a previous definition where a spouse is counted regardless of tax filing status. A larger family size typically results in a lower required payment amount.

In fact, the amended declaration suggests that some married borrowers could actually see their payments decrease.
Attorney Adam Minsky

This adjustment contrasts with proposals from the Trump administration that would have increased payments for married borrowers, arguing that excluding spousal income created a loophole.

Voices from the Field

Financial experts weigh in on the implications of this policy change:

When the courts blocked the SAVE plan regulations, they inadvertently created a window where getting married might actually lower some borrowers’ payments… Now that we’re back to pre-SAVE rules,your spouse counts in your family size regardless of tax filing status. This creates a potential sweet spot where smart borrowers can benefit.
michael Ryan, finance expert and founder of MichaelRyanMoney.com

marriage plays a vital role especially in reducing the amount of payment as Federal Poverty line thresholds are increased which may lead to lower discretionary income and lower payments. As your family continues to grow your repayment may decrease as well, due to thresholds being increased.
Kevin Thompson, CEO of 9i Capital and host of the 9innings podcast

Like with other financial benefits that come with marriage, proposals for student loan payments to be lowered with starting a family are worth considering. The burden associated with those monthly payments can be elevated when you consider the additional expenses of starting a new chapter from a marriage standpoint. And while we’ve seen this administration scale back on recent student loan forgiveness plans, not eliminating the debt but making it easier for individuals starting families is a step they may pursue.
Alex Beene, financial literacy instructor for the University of Tennessee at Martin

Looking ahead

The Department of Education plans to resume processing IDR applications by May 10, amid ongoing legal challenges surrounding the SAVE plan. A federal court has scheduled a status conference to ensure compliance with new IDR regulations.

Borrowers should monitor their loan servicers and assess how their tax filing status impacts their monthly payments. Maximizing pre-tax deductions, such as retirement contributions, can lower adjusted gross income and, consequently, student loan payments.

what makes sense for one couple might be financial folly for another. I’ve seen marriages postponed,hastened,and financially restructured all because of student loan implications.
Michael Ryan, finance expert and founder of MichaelRyanMoney.com

The most accomplished borrowers I’ve advised over my career aren’t necessarily the ones who found the perfect loophole. They’re the ones who stayed nimble, kept informed, and weren’t afraid to adjust their strategy when the ground shifted beneath their feet.
Michael Ryan, finance expert and founder of MichaelRyanMoney.com

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