Money Matters

Student loan repayment and filing separately or jointly...help!

I'm about to pull my hair out.

I have pretty significant student loan debt. It's more than my annual salary. I'm on the income-based repayment plan and I want to stay on the IBR plan, because I work for a non-profit and if I continue to do so, I'll have my debt forgiven after 10 years. The IBR keeps my payments nice and manageable.

I found out today that next year, they'll consider my husband's income as well if we file jointly. He makes more than I do on paper, but since he has more taken out of his paycheck than I do and I have additions to mine (mileage, phone allowance, bonuses), our gross incomes are actually pretty similar. Basically, what's going to happen to my student loan payments at that point is that they're going to double. I can't afford that!

We've discussed finances. For now, we pay all shared expenses jointly and individual expenses separately. My debt is my debt and it's not necessarily fair of me to ask him to shoulder it too. It works for us. However, I guess the government isn't going to see it that way!

HOWEVER...he's going back to school this fall. (He has no student loan debt currently.) If we file separately, he can't claim the lifetime learning credit for himself. I also can't deduct all the student loan interest I'm paying. There are a ton of downsides to filing separately.

I really have no idea how to handle this. Is anyone else in this situation and what do you do???

Kate (& Mark!)

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Re: Student loan repayment and filing separately or jointly...help!

  • Is the debt only forgive on the income dependent, or could it be applied to the longer 20 year term payment? Without numbers, it's hard to give many suggestions.
  • I really don't understand what you're saying. 

    It's not fair for him to help pay for your student loans.  But it's also not fair for him to miss out on the lifetime learning credit?  What about it being fair for you to get a lower monthly payment?  It seems like you're way too concerned about his finances and not enough about yours. 

    Really,when it comes down to it, saving money in the aggregate is better for both of you because no matter who saves more money you'll both benefit in the future by buying a house, car, retiring earlier, etc.  There is no way the two of you will ever reach mutual financial goals if you don't in some way look at your money in the aggregate instead of completely different worlds.  So look at the numbers and do what is best for the BOTH of you.  Forget about who individually benefits.

  • I wouldn't think of it as your debt or his debt. It is just debt of the marriage. So, I wouldn't worry about that.

    Anyhoo. I am on IBR and the public service forgiveness program. DH and I do not qualify for IBR if we file jointly and therefore we file separately.  We pay more in taxes by filing separately but being on IBR reduces my payment by nearly 2K a month. I have 200K in debt and pay $287 a month. So I recommend filing separately if you can. 

    It doesn't suck because it has  repercussions like there are certain credits/deductions  we can't take and we essential can't have a roth IRA or anything. But its worth it to have a nice low payment.

    Of course since I am on the forgiveness program  we will only be on IBR for 10 years vs. 25.

    image, image

  • He won't see it as debt of the marriage because I chose to go to school and take on the debt before we got married. Same with my car debt. (He recently paid off his car.) This is the way he thinks and I've accepted that I'm not changing it. And our financial setup works for us. When we have kids, it probably won't, and we'll probably have to tweak it.

    But, looking at the numbers, my payment will more than double. It'll go from $150-something to over $500. That's insane. Plus, I have outstanding interest that they'll throw at me at that point, because I'll be outside the "partial financial hardship" range. Arrgh.

    So, I guess no deductions for us. Honestly, I think it's kind of silly that the system assumes that all husbands and wives pool 100% of their money. Plenty of couples don't.

    Kate (& Mark!)

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  • image karinothing:

    I wouldn't think of it as your debt or his debt. It is just debt of the marriage. So, I wouldn't worry about that.

    Anyhoo. I am on IBR and the public service forgiveness program. DH and I do not qualify for IBR if we file jointly and therefore we file separately.  We pay more in taxes by filing separately but being on IBR reduces my payment by nearly 2K a month. I have 200K in debt and pay $287 a month. So I recommend filing separately if you can. 

    It doesn't suck because it has  repercussions like there are certain credits/deductions  we can't take and we essential can't have a roth IRA or anything. But its worth it to have a nice low payment.

    Of course since I am on the forgiveness program  we will only be on IBR for 10 years vs. 25.

    Ooohhhh we are going to chat tomorrow at work. Your loan payments are a fraction of mine!!  I'm nervous about the tax repercussions of filing separately.  

    Lilypie First Birthday tickers
  • image mrsbecky07:
    image karinothing:

    I wouldn't think of it as your debt or his debt. It is just debt of the marriage. So, I wouldn't worry about that.

    Anyhoo. I am on IBR and the public service forgiveness program. DH and I do not qualify for IBR if we file jointly and therefore we file separately.  We pay more in taxes by filing separately but being on IBR reduces my payment by nearly 2K a month. I have 200K in debt and pay $287 a month. So I recommend filing separately if you can. 

    It doesn't suck because it has  repercussions like there are certain credits/deductions  we can't take and we essential can't have a roth IRA or anything. But its worth it to have a nice low payment.

    Of course since I am on the forgiveness program  we will only be on IBR for 10 years vs. 25.

    Ooohhhh we are going to chat tomorrow at work. Your loan payments are a fraction of mine!!  I'm nervous about the tax repercussions of filing separately.  

    Ha, sounds good. I assume we have similar debt and well salaries. ha ha 

    image, image

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