Student loan borrowers face steeper 'marriage penalty' under RAP
CNBC • • business
Key Points:
- Married student loan borrowers face a "marriage penalty" under Income-Driven Repayment (IDR) plans, where combining incomes for joint tax filing can significantly increase monthly loan payments.
- Filing taxes separately may lower student loan payments for couples, especially if only one spouse has debt, but this can lead to higher overall tax liability and loss of certain tax benefits.
- The new Repayment Assistance Plan (RAP) from the Department of Education worsens the marriage penalty by calculating payments based on adjusted gross income without shielding basic living costs, causing joint filers to face higher monthly bills.
- Couples should carefully compare tax savings against increased student loan payments by consulting tax professionals to determine whether to file jointly or separately.
- Married borrowers are encouraged to sign up for automatic payments by September to receive a 1% interest rate discount through June 2028, and recent law changes now allow couples to separate their federal student loans after consolidation.
