Student Loan Forgiveness for Married Couples

Married couples can get their federal student loans forgiven if they earned less than $250k during the past two years, worked in public service for a decade, or paid their debt for 20+ years.

Marrying someone with student loan debt can introduce financial strain capable of testing the strongest bonds. The stress compounds when both spouses carry mounds of debt. Thankfully, student loan forgiveness is an option for most married couples.

The road to get there isn’t always as simple as it was when you were single. Many student loan forgiveness programs, in some way, tie your eligibility to your income, which can have a direct impact on how you decide to file taxes and, ultimately, whether it’s better to refinance for a lower interest rate rather than wait for uncertain debt relief.

Read on to learn more about student loan forgiveness for married couples.

Learn More: How to Apply for Student Loan Forgiveness

During the pandemic, the federal government tweaked the existing student loan forgiveness programs the U.S. Department of Education offers. As a result 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 get at least $10 thousand in debt relief. And some who’ve worked in public service for at least a decade or paid on their loans for 20+ years will get their remaining balance written off.

Here are three student loan forgiveness programs married couples can benefit from.

President Joe Biden’s student loan forgiveness plan

A federal appeals court temporarily 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 announced 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 approved relief for 16 million Americans, but borrowers may not see the relief applied to their account for several more weeks.

The Biden administration has imposed income caps that target forgiveness to low- and middle-income earners. Married couples qualify so long as their combined household income was less than $250 thousand in 2020 or 2021,

But what if you have not yet filed an income tax return for either of those years? It’s a good idea to hold off 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 eligible for the plan as long as their income was less than $125 thousand.

Worried about the tax liability if 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.

Note: Biden’s plan doesn’t cover all student loans. Private loans and some loans issued via the Federal Family Education Loan (FFEL) program aren’t eligible. But all Direct Loans, including Direct Stafford Loans, Direct subsidized and unsubsidized loans, and Grad and Parent PLUS Loans, qualify.

Learn More: Biden’s Student Loan Forgiveness

* Pell Grant recipients qualify for $20 thousand in relief.

Public Service Loan Forgiveness (PSLF)

Borrowers who work for a qualifying government or nonprofit employer can get their loan balances wiped out after 10 years of full-time work and payment towards their federal loans under one of the four income-driven repayment plans:

• Income-Based Repayment

• Income-Contingent Repayment

• Pay As You Earn

• Revised Pay As You Earn

Married couples who work in public service can get their debt forgiven if each individually works at least 30 hours per week on average. Unfortunately, there’s no way for them to combine their individual numbers of hours worked to qualify for PSLF.

Because the PSLF Program wipes out 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 spouse 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. But if you both have federal loans, you might be better off filing a joint return. You’ll usually get a lower tax bill and monthly payment.

Learn More: How to Qualify for Public Service Loan Forgiveness

IDR Forgiveness and IDR Account Adjustment

Income-Driven Repayment (IDR) plans are a category 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 benefit: loan forgiveness after at least 20 years of student loan payments.

Your loan servicer uses the adjusted gross income from your most recent tax return to calculate your payment amount under those plans. If you file a joint return, you could end up with a lower tax bill but a higher monthly bill.

These plans are great 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 switch to an IDR plan. But for a limited 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 automatically. Others must consolidate their loans into a Direct Consolidation Loan to qualify.

Related: Consolidation & Student Loan Forgiveness — Who Qualifies

Years ago, the Education Department encouraged married borrowers who needed a lower student loan bill to consolidate their loans together. Congress ended that program in 2006 but didn’t create a way for divorced borrowers to de-consolidate their spousal consolidation student loans. As a result, the department forced former spouses to work together to make payments. The inability to separate the loans places domestic violence survivors to remain in contact with their abusers.

Thankfully, lawmakers finally addressed the issue nearly 20 years later. President Biden signed the Joint Consolidation Loan Separation Act into law last month. Since the law was passed, the department has not provided an application process or instructions on how borrowers can separate their loans. But the law clearly states that they can submit a new consolidation loan application, allowing them to shed responsibility for debt they didn’t borrow for school and get a new loan for the balance of their loans.

Related: Spousal Consolidation Student Loans & Divorce

All federal student loans are eligible for at least one of the Education Department’s loan forgiveness programs. But not everyone will be able to take advantage of these options, 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 case, 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 might make sense. You’re going to pay back your loans, so you might as well try and grab a lower interest rate and better repayment terms. Use an online marketplace like Credible to shop with different lenders simultaneously.

Related: How to Refinance Student Loans

Managing student loan debt and forgiveness may seem like a chore, but with some planning and preparation, you and your spouse can easily take control of your financial future.

Due to a court order, the Education Department isn’t yet able to move forward with the student loan relief promised by the White House. But the application for debt forgiveness remains open. Keep an eye on StudentAid.gov for the latest information. You can also schedule a call with me to set up a one-on-one conversation. Together, we can explore the forgiveness options for your situation.

UP NEXT: Is a Spouse Responsible for Student Loans Incurred Before Marriage?