IBR and Married Borrowers

February 19, 2010

During the "negotiated rulemaking" process for the Higher Education Opportunity Act of 2008, the U.S. Department of Education agreed to improve the treatment of married borrowers when both borrowers have federal loans. We and our allies advocated for this change, which will go into effect in July 2010.

Current rule: When two married individuals both have student loan debt and file taxes jointly, they could face up to double the monthly loan payment of two unmarried borrowers in otherwise identical situations. This is because their combined income is used to calculate each spouse's own Income-Based Repayment (IBR) payment, ignoring the fact that their joint income must be used to pay down both borrowers' debts.

Negotiated change: Lenders will factor in both spouses' federal loan debt - and their joint income - when calculating IBR payments. Each spouse's IBR payment will be proportional to their debt amount.

This change will go into effect on July 1, 2010.

If the use of joint income for IBR calculations is a problem, married couples can choose to file taxes separately, in which case IBR would be based on the individual applicant's Adjusted Gross Income and debt. However, there are costs and tradeoffs associated with filing taxes separately as opposed to jointly, so these should be weighed carefully. You may want to consult a tax advisor before making this choice.

For more information on the treatment of married borrowers in IBR, look at page six of the Department of Education's IBR Q&A.

Income-Based Repayment and Pay As You Earn are two ways to help keep monthly payments affordable based on your income and family size. Visit the Department of Education’s Repayment Estimator to find out what your payments might be.
 

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How to switch to the Direct Loan program

If your federal loans are in the Guaranteed (FFEL) program — where your lender is a private entity like Sallie Mae or Citibank — you can consolidate into the Direct Loan program to qualify for Public Service Loan Forgiveness. Even if you have already consolidated your loans in the FFEL program, you may re-consolidate into the Direct Loan program to take advantage of this program.

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