The Marriage Penalty Gets Worse Under RAP
The core issue is straightforward: when you marry and file jointly, the government counts both spouses' income to calculate your student loan payment. Even if your salary stays flat, adding a partner's paycheck can push you into a much higher monthly payment.
According to Douglas Boneparth, who runs Bone Fide Wealth in New York, the shift can happen immediately. "Marriage can change their monthly payment immediately and dramatically, even if their own income hasn't changed at all," he says.
Under older income-driven plans, the jump could be rough. Under the new Repayment Assistance Plan, it is even steeper. In contrast to previous plans, RAP does not set aside any allowance for basic living costs.
RAP charges 1% to 10% of adjusted gross income, depending on earnings. Higher income means a larger percentage taken. Mark Kantrowitz, a higher-education expert, explains: "Each $10,000 increment of income pushes you into a higher percentage of AGI."
Consider this real-world example. A wife with $110,000 in student debt earns $50,000 on her own. Her husband has no loans and makes $70,000, for a combined $120,000.
On the standard income-based repayment plan, her monthly payment would be $730 filing jointly. Filing separately drops it to $146.
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Kantrowitz notes joint payers under RAP will likely feel an even bigger one because the plan's sliding percentage scale rises sharply with income.
His example: a borrower earning under $30,000 would owe 2% of income, or $50 monthly. Marry someone earning $45,000, file jointly, and their combined $75,000 income puts them at a 7% = rate. The payment jumps to roughly $437.50.
This steep jump is because RAP's formula uses a progressive percentage that increases with income, unlike older plans that often applied a flat rate after a certain threshold. Additionally, RAP does not subtract a living allowance before calculating payments, which can make the effective burden higher for married couples.
Weighing Lower Payments vs. Tax Savings
The obvious fix is filing separate tax returns, so only the borrower's income counts toward the loan and payment. But trade-offs still exist.
Joint filers generally receive more tax credits, largest deductions, and sometimes bigger retirement contribution benefits. Married borrowers filing separately lose the student-loan interest deduction, worth up to $2,500 a year.
When both spouses have student debt, separate filing savings shrink significantly. Take the same couple but imagine the husband also owes $75,000. Filing jointly, their combined payment is $730 ($434 from her, $146 from him).
Filing separately totals around $994 ($146 from her, $313 from him). Annual savings drop from roughly $7,000 to about $3,300.
Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, explains: "They're trying to say they have less when they both have student debt because they both shoulder the responsibility of making a payment on combined income."
Scott Buchanan, who heads the Student Loan Servicing Alliance, adds another wrinkle: RAP gives a $50 monthly discount per dependent, usually a child. But spouses filing separately cannot both claim the same dependent. "There's no double dipping if you are married and file separately," Buchanan says.
What All This Means for Your Money
Keeping payments low matters beyond monthly cash flow. Boneparth puts it directly: "Every dollar you reduce your payment by is a dollar more that gets forgiven at the end of 10 years." Couples must calculate carefully. Lower monthly payments through separate filing mean more after a decade, but weigh that against the tax costs.
For now, the best move is checking both filing options with a professional. As Kantrowitz says, "To view which path to go - separate versus joint - they integrate the math both ways." Your payment depend on it.
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