After the Department of Education on Tuesday retracted a previous statement that had implied there would be major adjustments to the way payments are determined under income-driven repayment programs, married student loan holders can finally relax.
Married borrowers who are enrolled in an income-driven repayment plan, a kind of federal student loan repayment program that links monthly payments to the borrower’s income and family size, and who file taxes jointly with their spouse would have their payments determined by their combined income under federal law.
However, monthly payments for borrowers who file taxes independently of their spouse are expected to be determined using their solo income; spousal income is not included. Due to the loss of several deductions, many married taxpayers who file separately pay more in taxes.
A high-ranking official from the Department of Education stated in a legal document that when figuring out payments for student loan borrowers using the ICR, IBR, and PAYE plans, spousal income would be considered even if they file taxes separately.
This was part of a legal case by a national labor union against the Trump administration’s temporary halt of the income-driven repayment plan system. However, the official later took back that statement in a new document submitted to the court this week. However, in an amended document this week, the official retracted that prior assertion. This is the current situation.
The Department of Education has threatened to include spousal income in the calculation of student loan payments for IDR plans. A federal appeals court’s recent ruling in the ongoing legal battle over the SAVE plan has effectively shut down the federal student loan income-driven repayment scheme since February.
President Joe Biden’s most recent IDR initiative, SAVE, aimed to lower monthly payments for borrowers and expedite student loan forgiveness in specific circumstances. Since last summer, SAVE has been banned. In its most recent ruling, the appeals court broadened the scope of the injunction preventing the SAVE plan to include the whole regulatory framework that oversees SAVE.
Although the continuing legal challenge is legally restricted to just the SAVE plan, the Department of Education had contended that the February verdict required the temporary shutdown of the entire IDR system, including for the ICR, IBR, and PAYE programs. According to the government, updating the IDR application and related processing system to conform to the new court ruling will need time from the agency and its loan servicers.