• Justin Howe

How is marriage affecting your student loans and taxes?


Student loan payments are increasingly more common for married couples today. At tax time, married couples must make a decision on whether to file separately or jointly and student loan payments may be a factor in that decision. For both Income Based Repayment (IBR) and Pay As You Earn Repayment (PAYE) repayment programs, your monthly student loan payment is calculated based on your Adjusted Gross Income (AGI).​ Couples can choose to file jointly, which may lead to a lower tax bill, or they can file separately, which may result in a higher tax bill, but smaller monthly student loan payments. If one or both of the spouses have student loans with income-based repayment plans, filing separately could be beneficial if it results in lower student loan payments. Filing jointly will increase your income if your spouse is also earning money and your required student loan payment will typically increase as well. In some cases, the difference is negligible; in others, this can add up to a pretty significant cost difference. In some instances the math doesn't always make sense to file separately. When couples file separately, they 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.

Every couple’s situation is different and they should run the math for their unique situation to decide for themselves. 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.

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