In a significant shift, the Trump administration’s Education Department has announced changes to student-loan repayment plans that could significantly affect married borrowers.
Starting by May 10, married borrowers who file separate income tax returns or are separated from their spouses will have their spousal income considered when calculating their monthly payments under income-driven repayment (IDR) plans.
This modification is expected to result in higher payment amounts for some borrowers, particularly where the combined household income exceeds that of an individual borrower.
According to Business Insider, this change is a direct consequence of a federal court’s block on former President Joe Biden’s SAVE plan.
Changes in the Calculation of Student-Loan Payments
Previously, borrowers who filed separately were only required to report their own income when determining their monthly IDR payments. However, with this new adjustment, spousal income will now be factored into the calculation.
This shift could potentially lead to higher payments for some borrowers, as the combined household income is typically greater than that of an individual borrower.
As Acting Undersecretary James Bergeron stated in a recent legal filing, this change is a “required consequence” of a federal court’s block on former President Joe Biden’s SAVE plan.
Legal Context and Impact of the Save Plan Block
The change stems from a legal ruling on former President Joe Biden’s SAVE plan, which aimed to reduce monthly payments and accelerate loan forgiveness for borrowers. The plan was blocked by a federal court, prompting the Education Department to revise its policies.
The legal framework states that, in the case of a married borrower who files a separate Federal income tax return, the Secretary must calculate the amount of the borrower’s income-based repayment based on the borrower’s own income and student loan debt.
The federal statute on income-based repayment specifies :
In the case of a married borrower who files a separate Federal income tax return, the Secretary shall calculate the amount of the borrower’s income-based repayment under this section solely on the basis of the borrower’s student loan debt and adjusted gross income.
Uncertainty Surrounding Implementation and Future Legal Challenges
While the statutory framework allows married borrowers to file separately for repayment purposes, it remains uncertain how the Trump administration will carry out these changes, or whether they will face further legal challenges.
The Education Department has not yet provided a clear timeline for the rollout of the revised applications, and there is a backlog in processing the existing applications.
In the meantime, borrowers can still apply for alternative IDR plans, such as the Pay-As-You-Earn (PAYE) plan or the Income-Contingent Repayment plan.
Additionally, those seeking credit toward Public Service Loan Forgiveness (PSLF) can use the “buyback” program, which allows them to purchase months that would contribute to the total of 120 qualifying payments required for forgiveness.
As the Education Department revises the online applications for these repayment plans, the future for married student-loan borrowers remains uncertain.
Borrowers affected by the changes may see a shift in their repayment amounts, and further legal decisions could alter the landscape of federal student-loan policies.
