Personal Finance

Not a lawyer or a financial advisor… but a wild tangent to think about… is it more affordable to be married or divorced.

It’s an administration of billionaires trying to get rid of “tax loopholes” for the common person so they can decrease their own tax liabilities. But they appear to be incapable of assessing cause and effect.

So yes you won’t get the benefit if you are married filing separate but if I am understanding correctly, it sounds like you can still get the benefit if filing single.

So if you were single and still getting the payment reduction would you still be in this situation?

If not maybe divorced and filing single and the other filing head of household while still living together could be an option.

Just another thing to consider.

There is an update with a clarification that says income won't be considered:

Update, April 16, 2025: On April 15, the Department of Education filed an amended declaration, clarifying that for the ICR, IBR, and PAYE plans, “married borrowers filing separate income tax returns or separated from their spouses will have the spouse counted in the family size for the purposes of calculating monthly payment amount under IDR plans.” The declaration removes the reference to spousal income being factored in for married borrowers who file separate tax returns.

Two necessary questions about you: 1) do you or your spouse have any federally-backed student loans, even if issued through a private lender? And 2) do you and your spouse currently file taxes as married filing jointly (MFJ)? From your description, it looks like you only mentioned your mortgage debt but not the type(s) of student loan debts that you or your spouse may have.

I ask these questions because from reading only that single article, the proposed change made by the Under Secretary of Education appears to only impact: a) federally-backed student loans that b) are being repaid under three of the four income-based repayment plans (specifically, PAYE, IBR, and ICR), and c) when the division of student loans between the couple would create lower repayments under the existing rules.

That last point needs some clarification: if both spouses carried equal-sized student loan debts and both spouses have the same individual income, then it's possible that there is no difference in monthly repayments whether the spouses combined their income and debts, or separated their income and debts, which is a choice that the existing rules allowed. Thus, if the existing rules are scraped and this choice goes away, this hypothetical couple is no worse off. But to be clear, I'm not an expert in how different income-based repayment plans scale with joint income, so such a hypothetical couple might not even exist.

What's important is to figure out if this even affects your situation. This is, after all, personal finance, and I save my complains about arbitrary and capricious regulatory whack-a-mole for another venue.

If you both don't have student loans, this is not an issue for you. If you both have private student loans, this is no worse off for you. If you have federally backed student loans but have no issue paying them down at the original rate, this is not an issue for you. If you have plan to, already have, or have been approved for a federal student loan income-based repayment plan, then this change might apply to you.

But if you applied (or will apply) under SAVE, this doesn't seem to affect you. Whereas if you applied/will apply under the other three, and you will absolutely not change your filing status from MFJ, then this will not affect you.

Insofar as I can glean from this article, the regulatory change removes the option to file as married filing separately (MFS) in order to potentially reduce the monthly repayment amount. If you were open to possibly switching to MFS, then you'd have to assess the likely tax increase caused by changing from MFJ to MFS, and then assess how much the monthly repayment would reduce by.