To secure Married Couples PSLF, you’ll need to have an understanding of PSLF as a married couple. That’s probably one reason why it’s common for people to choose a spouse based on their own profession. However, this resource should guide you through!
Overview of Married Couples PSLF
Marrying someone with student loan debt can bring financial strain capable of testing the strongest bonds.
The stress compounds when both partners carry mounds of debt. Thankfully, student loan forgiveness is an opportunity for most married couples. The road to get there isn’t always as easy as it was when you were single.
Many student loan forgiveness programs, in some way, tie your eligibility to your earnings, which can have a direct impact on how you choose to file taxes and, ultimately, whether it’s better to refinance for a lower interest rate rather than wait for uncertain debt relief.
How Can Married Couples Get Public Service Loan Forgiveness?
Generally, married couples can secure federal student loans forgiven if they acquired less than $250k during the past two years, worked in public service for a decade, or settled their debt for the past 20 years at least.
During the pandemic, the federal government modified the existing student loan forgiveness programs the U.S. Department of Education offers.
As a consequence of those changes, the department has already written off billions of dollars in student loan debt for tens of thousands of borrowers.
Millions more will obtain at least $10 thousand in debt relief. Some individuals who’ve worked in public service for at least a decade or paid off their loans for 20+ years will get their remaining debt written off.
Below are three student loan forgiveness programs married couples can benefit from:
President Joe Biden’s Student Loan Forgiveness Plan
A federal appeals court momentarily halted the debt relief program while it weighs an emergency request by six GOP states to block the plan.
Nearly two months after the president disclosed that he was taking executive action to cancel up to $20 thousand worth of federal student loans, the Education Department opened the application for eligible borrowers.
More than 26 million people have applied, and the department has authorized relief for 16 million Americans, but borrowers may not see the relief applied to their account for several more weeks.
The Biden administration has set income caps that target forgiveness to low- and middle-income earners. Married couples qualify so long as their joint household income was less than $250 thousand in 2020 or 2021.
But what if you have not yet filed an income tax retrieval for either of those years? It’s a good idea to pause filing until you calculate your adjusted gross income based on whether you file a separate or joint return.
Married borrowers who file a separate return are qualified for the plan as long as their income is less than $125 thousand.
If you are worried about the tax liability in case you file separately, speak with a tax professional about amending your tax return after the cancellation is applied to your account. The IRS allows married couples to change their tax filing status from MFS to joint.
Keep in mind that Biden’s plan doesn’t cover all student loans. As such, private loans and some loans issued via the Federal Family Education Loan (FFEL) program aren’t eligible.
However, all Direct Loans, including Direct Stafford Loans, Direct subsidized and unsubsidized loans, and Grad and Parent PLUS Loans, qualify.
Borrowers who work for a qualifying government or nonprofit employer can get their loan balances brushed off after 10 years of full-time work and payment towards their federal loans under one of the four income-driven repayment plans:
Pay As You Earn
Revised Pay As You Earn
Married partners who work in public service can get their debt forgiven if each individual works at least 30 hours per week on average. Unfortunately, there’s no way for them to merge their individual numbers of hours worked to qualify for PSLF.
Because the PSLF Program brushes off your entire balance tax-free, the department effectively incentivizes borrowers to reduce their monthly student loan payments in order to pay the least amount today while maximizing the amount forgiven later.
If you qualify for PSLF and are married to a partner who doesn’t have student loans, it makes sense to file taxes separately so you can get a lower monthly payment under the IBR or PAYE plans.
However, if you both have federal loans, you might be better off filing a joint return. You’ll usually fetch a lower tax bill and monthly payment.
IDR Forgiveness and IDR Account Adjustment
Income-driven repayment (IDR) plans are a classification of repayment plans that use a borrower’s income and family size to determine how much they can afford to pay each month.
Each of the four IDR plans — Income-Contingent Repayment, Income-Based Repayment, Pay As You Earn, and Revised Pay As You Earn — comes with an added advantage: loan forgiveness after at least 20 years of student loan payments.
Your loan servicer uses the modified gross income from your most recent tax return to calculate your payment amount under those plans. If you file a collective return, you could end up with a lower tax bill but a higher monthly bill.
These plans are excellent if you’ve been enrolled in them for years. But if you’ve been in any other plan, you’d normally start the repayment clock at zero when you change to an IDR plan.
However, for a little time, the U.S. Department of Education is giving all borrowers credit towards forgiveness — even those who’ve been in repayment since last century or haven’t made many payments because they’ve been in deferment or forbearance for years.
The IDR Waiver will give most borrowers credit instantly. Others must consolidate their loans into a Direct Consolidation Loan to be eligible.
How Do I Pursue Forgiveness for Joint Consolidation Loans?
Years ago, the Education Department encouraged married borrowers who desired a lower student loan bill to consolidate their loans together.
Congress ended that program in 2006 but didn’t design a way for divorced borrowers to de-consolidate their spousal consolidation student loans.
As a result, the department forced former spouses to work jointly to make payments. The inability to separate the loans places domestic violence survivors to stay in contact with their abusers.
Thankfully, lawmakers finally handled the issue nearly 20 years later, and President Biden signed the Joint Consolidation Loan Separation Act into law last month.
Since the law was passed, the department has not delivered an application process or instructions on how borrowers can separate their loans.
However, the law clearly states that they can submit a new consolidation loan application, permitting them to shed responsibility for debt they didn’t borrow for school and get a new loan for the balance of their loans.
What Should I Do if My Spouse and I Don’t Qualify for Forgiveness?
All federal student loans are qualified for at least one of the Education Department’s loan forgiveness programs.
However, not everyone will be able to take advantage of these opportunities, either because their salary was too high to qualify for cancellation, they don’t work in public service, or they’ll repay their loans sooner than 20 years.
Others won’t be eligible for relief because they have FFEL Loans — in that circumstance, they’ll need to consolidate — or private student loans. If that’s the case for you and your spouse, refinancing your loans with a private lender may make sense.
You’re going to pay back your loans, so you may as well try and grab a lower interest rate and better repayment terms.