Over the last few days I’ve received a number of questions about IBR, and other income driven plans such as REPAYE and Pay As You Earn. It seems there is a ton of confusion about calculating income driven payments with spouses each have student loans.
The short answer is that if you and your spouse both are on IBR, then as a couple your payments will be the same as they would be if you were single.
How do I know?
I normally don’t like to dwell on the research that goes into each article, but given that there is so much contradictory information out there on this topic, it is probably prudent.
Like any student loan issue, it starts with a call to the student loan servicer. When I asked about how marriage would affect my student loan payment, I proposed the following hypothetical. Suppose my spouse and I each make $40,000 per year, both have student loans, and both are on IBR. Will our payments be the same as two single people making $40,000 per year, or will they be double. I was told confidently (and incorrectly it turns out) that our payments would be double.
Because I was fairly confident that the information I was given was incorrect, I politely went through a number of other hypotheticals with my lender. Eventually, the customer servicer representative changed her answer. She explained that if we both were on IBR before marriage and then got married, our total payments should remain the same. She based this response on section 3 of the IBR and PAYE application form. This particularly clever customer service representative noticed that you are able to submit information about your spouses federal student debt. They wouldn’t ask for this information if it didn’t count. Thus, she concluded that her initial answer was wrong, and that payments would not double if two IBR borrowers got married.
Not being fully satisfied with this answer, I then turned to google for further help based upon the information from my lender. Eventually, I found the definitive answer in the form of the Code of Federal Regulations, specifically, 34 CFR 685.221(b)(2)(ii), which states that when calculating IBR payments:
The Secretary adjusts the calculated monthly payment if—Both the borrower and borrower’s spouse have eligible loans and filed a joint Federal tax return, in which case the Secretary determines—
(A) Each borrower’s percentage of the couple’s total eligible loan debt;
(B) The adjusted monthly payment for each borrower by multiplying the calculated payment by the percentage determined in paragraph (b)(2)(ii)(A) of this section; and
(C) If the borrower’s loans are held by multiple holders, the borrower’s adjusted monthly Direct Loan payment by multiplying the payment determined in paragraph (b)(2)(ii)(B) of this section by the percentage of the total outstanding principal amount of the borrower’s eligible loans that are Direct Loans;
Similar language for PAYE can be found at 34 C.F.R. § 685.209(a)(2)(ii)(B).
This legal jargon says that the total IBR payment is calculated for the couple. Individual payments are then based upon the portion of debt in the name of that particular spouse. So if your wife has twice the student debt you do, if you both are on IBR, her payment will be double yours… but as a couple your total payment will effectively stay the same.
Bad info to avoid…
Many customer service representatives will get this information wrong, like mine did. This is a pretty complicated bit of student loan rules, so it isn’t reasonable to expect them to advise you on this subject perfectly.
Perhaps that most harming source of bad information is the department of education student loan calculator. This estimator does not account for spousal student debt, but does include spousal income. So if you estimate your payment, and then estimate your spouses, it is possible you will get a number double what you actually owe.
UPDATE 11/7/16: Great news on the repayment estimator site… it now includes an option to list spousal income as well… meaning this previously lousy resource is now very helpful!
If you and your spouse both have student loans and both sign up for IBR or PAYE, there shouldn’t be a marriage “penalty” if the paperwork is processed correctly. However, given the complicated nature of this issue, it is something that is worth keeping a close eye on as your documents are processed.