IBR for Married Couples who Both Have Student Loans

Michael Lux Blog, Student Loans 11 Comments

Over the last few days, I’ve received several 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 basic rule is straightforward: If you and your spouse both have student loans and both are on an Income-Driven Repayment Plan, then as a couple, your total payments will be approximately the same as they would be if you were single.

Your payments may change if you get married, but the change to your partner’s payments will offset the billing difference. For example, if your monthly payment goes up by $100, your partner’s monthly payment will go down by about $100.

The Rules for Couples on Income-Driven Repayment Plans

I usually 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) that our payments would be double.

Because I was reasonably confident that the provided information was incorrect, I politely went through several other hypotheticals with my lender. Eventually, the customer service 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 the Income-Driven Repayment application form. This particularly clever customer service representative noticed that you could submit information about your spouse’s 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. A bit of legal research followed. 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 basically says that the total IBR payment is calculated for the couple. Individual payments are then based upon the portion of the debt in the name of that particular spouse. So if your spouse 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.

Avoiding Confusing Information

Many customer service representatives will get this information wrong as 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 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!

Calculating Monthly Payments

Now that the Department of Education’s Student Loan Estimator is working for married couples who both have student debt, borrowers can estimate their monthly payments as a married couple.

For those that want to understand how the calculations are made, the Department of Education is first looking at the combined adjusted gross income (AGI) of the couple from their most recent tax return. From that number, the Department will calculate the discretionary income of the couple. Depending upon the Income-Driven Repayment plan selected, the couple will be responsible for paying 10, 15, or 20% of their discretionary income towards their federal student debt. (Up to this point, the process for single individuals and couples is the same.)

When couples both have federal student loans, the payment is split proportionally to how much each partner has borrowed. In other words, the total spending each month will be the same, but the spouse who borrowed more will be the one with the higher payments.

An Example of Changing Payments after Getting Married

Your current monthly PAYE payment is $100. Your future spouse has a PAYE payment of $50. Combined, the two of you spend $150 per month.

Upon getting married, your individual monthly payments may change, but the total should be approximately the same. If you and your new spouse both have approximately the same amount of federal debt, you will each pay $75 per month. Even though your payment went down, your new spouse’s payment went up by the same amount.

Bottom Line

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 worth keeping a close eye on as your documents are processed.

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Ashley H
Ashley H

My husband and I both owe federal student loans. We have been filing separately for our taxes for 2 years so as to not “double” our IBR payments. Has this information been wrong all along? If we were both on IBR and filed jointly would we only pay 15% of our combine discretionary income? Does this mean we can both apply for REPAYE?
I have read on so many student loan websites that the payment would be doubled… my head is spinning. I feel like we need to go to law school just to figure out how to pay our own loans! I wish they made this a little more straightforward…

The Student Loan Sherpa
Reply to  Ashley H

Filing taxes jointly and both signing up for REPAYE could result in some significant savings each year. The Department of Education student loan repayment estimator is now a great tool to use to run the numbers.

Ashley H
Ashley H

If I run the numbers with filing jointly, both our salaries and loans my my monthly estimated REPAYE bill is quite more than I pay now. Should I assume this is my weighted payment since my debt is about 3 times greater than my husbands? I ran the numbers for him and his payment is less than it is now. It doesn’t specifically state it on the website

The Student Loan Sherpa
Reply to  Ashley H

When you ran your numbers did you also enter his debt? If you don’t include spousal federal student debt, the numbers will be off.

MMartin
MMartin

Hello,

My husband and I are in a similar situation but newly married so looking into how to file taxes in light of our loans. Both of us have significant loans and are both on REPAYE. We were trying to figure out what is the best situation but it’s challenging! I ran the numbers as you instructed on the repayment calculator and it gives a figure for me when I run it, say $400 and a figure for him when he runs it say $350. That makes sense because my loans are slightly more but I couldn’t determine what would we be paying? A proportionate amount of one of those numbers or $750 or some other figure? Assistance appreciated!

The Student Loan Sherpa
Reply to  MMartin

When you both have federal loans they first determine what you pay as a couple and then they determine individual payments based on proportionate amount of debt. If you have more federal student debt than your husband, your student loan payment will be higher.

Papplebeast Jefferson
Papplebeast Jefferson

That’s assuming both spouses are on payment plans based on the same % of discretionary income.

MMartin
MMartin

Right, I get that mine will be higher proportionally. I am just unsure what payment amount they will use. Currently, I pay around $120 and my husband pays just over $400 both single filer and on repaye. Using the calculator with my exact loans, filing jointly, accounting for my husbands loans it’s estimates my payment under repaye around $450. When my husband did the same, using his exact loans and imputing my information filing jointly it estimates it at just under $400 under repaye. My question is – what number would we pay as a couple? Is it $450+$400? Or just $450 maybe? Thank you so much for your help and blog! There are few resources and loads of misinformation.

The Student Loan Sherpa
Reply to  MMartin

when you use the estimator, be sure to enter you husbands loan information when you calculate your payments and vice versa. It should produce the most accurate estimate. If you think something is off, I’d suggest calling your loan servicer and having them walk you through it to make sure there are no errors.

Shula Freedman
Shula Freedman

Just to clarify– when you say “they first determine what you pay as a couple”– when filing jointly, we, as a couple, are expected to make loan payments that equal 10% of discretionary joint income, correct? That’s the takeaway from this post? And then that amount is distributed between us based on loan size/proportion? And NOT that we are each expected to pay 10% of discretionary joint income, making it a total of 20% of our joint income going towards loans? I’ve been searching for that answer for so long that I’m just trying to make sure I’m not missing something. Hoping to avoid having 20% of our income go towards loans.

The Student Loan Sherpa
Reply to  Shula Freedman

You read that correctly. If it is processed correctly it should be a total of 10% of your joint discretionary income if you are both on the same plan.