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:
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