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Should We File Taxes as Married Joint or Married Separate?

Written by Steve Rhode

“Dear Steve,

I have graduate degree loans totaling close to $70K now w/interest that I have been paying since 2001. I have been paying a reduced rate ($20/mo) on them for some years now because I haven’t been able to work since our first child was born 10yrs ago.

My husband also has sizable graduate loans of about $90K, but in another 9yrs will be eligible for federal employee forgiveness on some of those loans (not private ones).

I will not ever go back to work because I care for a special needs child. I was told by Navient (DoE loans) that if we file taxes married/separately, I would pay $0, and after 20yrs it all would be forgiven.

The issue is how that would affect our taxes in those 20yrs, there are many penalties married/filing sep, in addition to the reduced IBR payment my husband receives with our loans combined. I have asked around, but am having no luck finding anyone who really understands the ins and outs of student loans, and that includes accountants.

My question is this: could we continue as we are – married/filing jointly, I continue my reduced payments, and then in 10yrs we begin to file married/separately, and I then pay $0 for another 20yrs? Or is there the expectation that loan forgiveness options will not be as plentiful in 10yrs time as they are now? There are also the tax implications to think about during those 20yrs. Thank you very much.


Dear Elie,

I would think you’d want to start filing married separate now. The government has recently announced new proposals in the Student Aid Bill of Rights which would suck in your tax return from the IRS automatically each year to re-certify your reduced payment under what I think is probably the Pay As You Earn program for you.

According to the very helpful online calculator provided by the U.S. Department of Education, as long as your income is $0 and your tax filing is married filing separately then your payment under the income driven plan would be $0 per month.

If you file married joint then your payment would be calculated using household income.

So the question for an accountant really should be if your husband filed taxes as married separate, what would the increase tax liability be? That I can’t answer for you.

On your husband’s Public Service Loan Forgiveness loan discharge, keep in mind that all payments made while in a suitable occupation will count towards the required 120 payments if the payments were on-time and made after October, 2007. Considering that, who knows, maybe more of his previous payments might qualify towards the forgiveness.

Given the facts you presented in your question it seems that filing taxes as married separate would significantly benefit you and the $0 payment plan. If your income changes during the next 20 years and you start to make money then you may no longer qualify for the income driven payment plan. That’s always the downside of these things. If that happened then the balance of your loans owed would be gigantic. See this article for details why income based repayment plans are not always a good thing.

Please post your responses and follow-up messages to me on this in the comments section below.


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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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