New Student Loan Plan Deepens Marriage Penalty, Raising Bills to $730

Married borrowers who file jointly under the new Repayment Assistance Plan could see monthly student loan bills rise by hundreds of dollars.

The Education Department's new Repayment Assistance Plan, available since July 1, scales payments from 1 percent to 10 percent of adjusted gross income, deepening the "marriage penalty" for couples who file jointly.

"Marriage can change their monthly payment immediately and dramatically, even if their own income hasn't changed at all," said Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York.

Under RAP, monthly payments range from 1 percent to 10 percent of a borrower's earnings — the more you make, the larger the required payment. A borrower earning under $30,000 a year pays 2 percent of AGI, or $50 a month; filing jointly with a spouse earning $45,000 pushes them to the 7 percent tier, leaving a bill of roughly $437.50, according to higher-education expert Mark Kantrowitz.

Roughly half of the more than 42 million Americans holding student loans are married, and outstanding debt exceeds $1.6 trillion, per the Congressional Research Service. For couples pursuing Public Service Loan Forgiveness — signed into law in 2007 — every dollar trimmed from a monthly payment is wiped clean after a decade of qualifying service.

Filing Separately Can Cut Payments, at a Tax Cost

The biggest decision married borrowers face is whether to file taxes jointly or separately, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York. Filing jointly combines both spouses' earnings when the Education Department calculates an income-driven repayment bill, which can sharply raise the monthly amount.

Nierman's example: A wife owing $110,000 in student debt and earning $50,000 a year, with a husband who has no loans and makes $70,000, would pay $730 a month on Income-Based Repayment if they file jointly. Filing separately drops her bill to $146. When both spouses hold loans — the husband owing $75,000 — the combined payment falls to $459 from $730, cutting annual savings to about $3,300 from roughly $7,000.

The tradeoff is real. Filing separately forfeits the deduction of up to $2,500 a year in student loan interest and can raise overall tax liability, said Landon Warmund, a certified financial planner at Reliant Financial Services in Kansas City, Missouri. "Have a tax professional run the numbers to see the tax cost side," Warmund said. "Run the numbers on the student loan side and compare the two."

Autopay Discount and Other Changes

The Trump administration is offering a 1-percentage-point discount on interest rates for borrowers who sign up for automatic payments by the end of September, through June 30, 2028. "Both spouses should enroll if they have separate loans," Boneparth said.

Married couples can no longer combine their debt into one loan through consolidation, a change that followed a 2022 law allowing couples to separate loans again. RAP also offers a $50 monthly discount per dependent, though spouses filing separately cannot both claim the same dependent, said Scott Buchanan, executive director of the Student Loan Servicing Alliance.

Rates, repayment terms and deadlines cited here reflect the plan as of the source date; borrowers should verify details against the latest official announcements from the Education Department and their loan servicer before making decisions.

This article is for informational purposes only and does not constitute investment advice.