“So we beat on, boats against the current, borne back ceaselessly into the past.”
-The Great Gatsby
If you’re a close fan of my blog (all one and a half of you!), you might feel a sense of deja vu. Yup, I did start my last blog post about student loans with that exact quote. That’s because I am writing another post about student loans. It turns out I got a couple of details in that last post wrong (oops, sorry guys!). Which is why learning about (and paying off) students sometimes feels just like beating up, boats against the current, never quite knowing you’ll find the dream girl you are chasing (paying off your loans).
When I wrote that other post a few months ago, the Fiance and I (lucky for me I found my dream girl) were about to get married and the personal finance nerd within had a minor freakout about the state of our loans and how they would be affected by marriage. So naturally I did some research and wrote a blog post about it. When I realized I got some things wrong in the post, I took it down, and signed us up for a one-hour consolation with Rob from Student Loan Planner, a CFP specializing in student loans. He set me straight on a few issues, mostly to the positive, greatly setting my mind at ease. So I want to do two things. First, just summarize where we are at. Second, I want talk about the things I got wrong in my last post, because I doubt I’m the only one with a few misconceptions.
Where are we. We are married, working at government or non-profit organizations, both with hefty student loans and advanced degrees (law for me, masters in social work for her). I am about 4 years into the 10 year PSLF payments, and she is about one year behind me even though we graduated our respective degrees at the same time (because of some bad advice about forbearance she received from her loan provider right after graduation. Pro tip–take everything your loan provider tells you with a grain of salt). As a result, we are not in pay-this-loan-off-as-fast-as-you-can-my-hair-is-on-fire mode. Because we are going for loan forgiveness, we actually want to make the minimum payments we can, and so get the largest amount of loan forgiven as possible.
Now, lets get to the things I got wrong. The first, and most egregious mistake I made was thinking that the Wife and I would get kicked off our repayment plans because we make too much money. I thought this was the case, because every time I tried to use a student loan calculator online, including the one on studentloans.gov, and input our marital status and income, the calculator stated we did not qualify for the income based repayment plans. It turns out though, this is because the calculator is calculating as if we are about to sign up for repayment and make our very first payment. In other words, the calculator is assuming we are just starting out. As Rob explained, this is not the case. We will not get kicked off of our respective income based repayment plans. I still haven’t found a calculator online besides the one the Student Loan Planner people provide that doesn’t assume you are just starting out. (Here’s a link to their calculator.)
Second, I thought that if we filed married-filing-jointly, we would get truly hosed, because our student loans would take our double incomes, base our income-based repayment scheme off that double income, and not take into account the other’s loans. Rob explained that this is not how it works. Instead, the loan providers take into account both our total loans balances between the two of us, and our total income (if we file jointly). The loan payments are then split up based on our total income, and pro-rated across our two payments based on how big each of our loans is. Again, I was being too negative!
Third, I thought that the only option for us was to file our taxes married-filing-separately because if we filed jointly, we would get kicked off our repayment plans. As I learned from Rob, this is not the case. In fact, we are much better off filing jointly. I am on the PAYE repayment plan, and the Wife is on the REPAYE plan. The REPAYE plan takes into account both spouses’ incomes, even if you file separately. So filing separately wouldn’t actually get us anywhere for her plan (for my PAYE plan, it would help, but based on the tax implications, the fact that filing separately wouldn’t help for her plan, and that the loan providers will take both our loans into account anyway, it doesn’t seem worth it for us).
One thing I did get right is the consolidation discussion. If we decided to consolidate our loans, so that we only had one large loan, we would reset the clock on or PSLF payments. Fortunately, we don’t need to do this to avoid our incomes being double-measured because after our discussion with Rob I know that the loan providers should take into account both of our incomes.
So where does that leave us? Well, by and large staying the course! Some of you are probably thinking, Dave, you paid a bunch of money to basically change nothing. To me, it was well worth it to know that the Wife and I are on the correct track for our repayment plans, to know the proper tax-filing status for us based on our loans, and most importantly, to know that we are not going to get kicked off our repayment plans just because we got married!
So what are we going to do going forward:
- Keep our repayment plans. Wife on REPAYE, me on PAYE. (If you want a deeper discussion on the differences between these plans and why we have these specifically let me know and I will discuss in the comments!)
- File our taxes jointly, when it comes time! I’m looking forward to this (married money nerd, sorry).
- Minimize our discretionary income, by putting as much into retirement accounts as possible.
Before adjusting any of your loans plans, or trying any of these options, please note that every person’s loan situation is totally different and none of this is a recommendation for you. I recommend doing your research, and if you still have questions, hit up a professional like Student Loan Planner! I can highly recommend them, even if I can’t tell you what to do with your loans!
For those of you into Podcasts and want to do some learning on your own, the founder of Student Loan planner started one and its packed full of useful information. Where are you at in your student loan story? Did you have any misconceptions about repayment too? I’d love to hear!
*I am not affiliated with Student Loan Planner in any way. I just learned a sh*tload from them.