Married Student Loan Borrowers’ Payments May Jump Under New GOP Plan

Senate Republicans released draft reconciliation legislation this week that builds on efforts by their House counterparts to reshape the federal student loan system. The Senate version of the bill is identical in many ways to the House legislation, which passed the chamber last month on a largely party-line vote. But there’s a critical difference between the two versions. If the Senate version of the bill ultimately becomes law, it could cause monthly student loan payments to dramatically increase for many households, particularly for married borrowers.

The changes center on income-driven repayment. IDR plans are a type of federal student loan repayment plan that offers borrowers affordable payments based on a formula applied to their income. The bill would make significant changes to the IDR system by fully repealing three plans – ICR, PAYE, and the SAVE plan. The legislation would preserve the IBR plan in a modified form for current borrowers. But borrowers who take out new loans going forward would only be able to access a new IDR option created by the bill called the Repayment Assistance Plan, or RAP.

While the details of RAP are largely the same between the House and Senate, the Senate version of the bill appears to treat married couples differently than the House version does. Between that, and the more expensive repayment formula associated with IBR as compared to the other IDR options, many married borrowers may experience significant increases in their monthly payments if the bill passes. Here’s a breakdown.

Senate GOP Plan Appears To Factor In Spousal Income For Student Loan Payments

For all current income-driven repayment plans – ICR, IBR, PAYE, and SAVE – payments are calculated based on the combined income of married borrowers only if they file their taxes as married-filing-jointly. Borrowers who file their taxes as married-filing-separately would have their income-driven payments based on their individual income. Filing separately can cause some households to pay more in overall taxes, so it doesn’t make sense for everyone. But for many married borrowers, filing as married-filing-separately is the only way to get an affordable monthly student loan payment, even if it means higher taxes.

Under the House version of the reconciliation bill that narrowly passed that chamber in May, this treatment of married borrowers would be extended to the new RAP plan.

“The term ‘adjusted gross income’, when used with respect to a borrower, means the adjusted gross income (as such term is defined in section 62 of the Internal Revenue Code of 1986) of the borrower (and the borrower’s spouse, as applicable) for the most recent taxable year, except that, in the case of a married borrower who files a separate Federal income tax return, the term does not include the adjusted gross income of the borrower’s spouse,” reads the text of the House bill.

But while the Senate version of the bill released this week is similar to the House version in almost every way, there’s a notable difference in the bill’s definition of Adjusted Gross Income for the RAP plan in the Senate bill.

“The term ‘adjusted gross income’, when used with respect to a borrower, means the adjusted gross income (as such term is defined in section 62 of the Internal Revenue Code of 1986) of the borrower (and the borrower’s spouse, as applicable) for the most recent taxable year,” reads the bill. The Senate’s language completely omits the exception for separate federal tax returns outlined in the House version.

This could have dramatic ramifications for married borrowers. A borrower who has an Adjusted Gross Income of $50,000 who files taxes separately from their spouse would have a monthly RAP payment of around $208 per month. But if their spouse earns the same amount of income, so that their combined Adjusted Gross Income is $100,000 regardless of their marital tax filing filing status, the monthly RAP payment would jump to more than $830 per month – a four-fold increase.

Student Loan Payments Would Also Increase For Borrowers Forced Into IBR

The RAP plan would be the only income-driven repayment option for borrowers who take out federal student loans after July 1, 2026, under the terms of both the House and Senate bills. Borrowers already in repayment on their student loans prior to that date could maintain access to a modified version of Income-Based Repayment, or IBR. But they would lose access to more affordable options like the PAYE and SAVE plans. Borrowers who are enrolled in these plans would be moved into IBR, unless they opt to switch to RAP (but if they do that, they would be locked into RAP, with no option to change plans again in the future).

Both the House and Senate bills would appear to preserve the marital tax treatment of borrowers under IBR, meaning married borrowers enrolled in IBR should continue to be able to file separate federal tax returns to exclude a spouse’s income from being factored into the monthly student loan payment calculation. But moving into IBR from PAYE or SAVE could also significantly increase a borrower’s monthly student loan payment, even if they can continue filing taxes separately.

“A typical family of four headed by a borrower with a bachelor’s degree would be forced to pay an additional $2,808 per year should Congress enact this proposal, when compared to the SAVE plan,” said the Student Borrower Protection Center in a letter to the Senate Health, Education, Labor, and Pensions Committee Chair and Ranking Member on Wednesday. For SAVE plan borrowers in particular, who have been in forbearance for the last year due to ongoing legal challenges, “Borrowers will experience an immediate and unprecedented payment shock as their monthly payments jump from $0 per month to $431 for a typical single student loan borrower with a college degree—an annual increase of more than $5,000” annually, said the group.

Other Changes To Student Loan Programs

The bill would make other changes to the federal student loan system that could also impact married borrowers. The legislation would effectively eliminate income-driven repayment altogether for Parent PLUS borrowers, with the exception of those who have already consolidated their Parent PLUS loans and enrolled in Income-Contingent Repayment. This could push many parent borrowers, who would effectively have no affordable repayment option, into default. The bill would also limit Parent PLUS borrowing and phase out the Graduate PLUS program, which could force families to rely more heavily on private student loans, which which are generally costlier and riskier than their federal counterparts.

“The Senate reconciliation bill’s higher education provisions would cause widespread harm to American families by making college more expensive, making student debt much harder to repay, unleashing an avalanche of student loan defaults, and rolling back basic protections for students who are defrauded by their college—all to fund tax cuts for the wealthy,” said Sameer Gadkaree, president of The Institute for College Access & Success, in a statement earlier this week. “The proposed overhaul of the student loan repayment system would take the unprecedented step of eliminating existing protections for borrowers. It would implement an overly complex plan that departs from decades of precedent by forcing the lowest-income borrowers to make unaffordable payments and extending the repayment term to 30 years. Taken together, this will likely drive many more borrowers into default.”