Student Loan Payments May Skyrocket Next Month For Married Borrowers, Suggests Trump Administration

Student loan payments may dramatically increase next month for millions of people, after the Trump administration suggested in a legal filing on Friday that the Department of Education will change how it treats married borrowers in income-driven repayment plans.

The declaration was submitted as a new lawsuit against the Trump administration for blocking access to income-driven repayment plans enters its next phase. Income-driven repayment programs are congressionally-mandated repayment options that offer borrowers affordable student loan payments tied to their income and family size, with eventual student loan forgiveness after 20 or 25 years.

The American Federation of Teachers, a national labor union, sued the administration in March after the Department of Education took down applications for income-driven repayment programs and halted all processing. The department indicated it was required to do so following a ruling by the 8th Circuit Court of Appeals in a separate legal challenge over the future of the SAVE plan, one of four separate income-driven repayment plan options. But the AFT argues that preventing borrowers from accessing the remaining three plans – ICR, IBR, and PAYE – is unlawful, and is blocking borrowers from affordable payments and student loan forgiveness. After the AFT filed its lawsuit, the department restored access to income-driven repayment applications, but has still not resumed processing, leaving millions of borrowers in limbo.

The latest Trump administration filing was submitted in conjunction with its opposition to the AFT’s motion for a temporary restraining order. If granted, the motion could force the Department of Education to resume processing income-driven repayment applications. But the department’s latest filing suggests that some married borrowers could see dramatic increases in their monthly payments if the administration has its way.

Borrowers Can File Taxes Separately To Exclude Spousal Income From Student Loan Payment Calculation

Under all four current income-driven repayment plans, married borrowers have a choice. They can file taxes jointly with their spouse, which may allow them to benefit from certain tax deductions, but will cause their student loan payments under income-driven repayment plans to be calculated based on their combined income.

Alternatively, they can file taxes as married-filing-separately. This may cause some households to pay more in taxes, but under income-driven repayment plans, the borrower’s monthly student loan payment would be calculated based on the borrower’s income alone. The policy rationale is that a spouse is not legally responsible for the repayment of the borrower’s federal student loan debt, and married couples who keep separate finances for tax purposes (and lose out on marital tax benefits and incentives as a result) shouldn’t be double penalized with a higher student loan payment.

Similarly, borrowers who are separated from their spouse are also not required to have their monthly student loan payments under income-driven repayment plans be based on their combined income, regardless of their tax filing status. Separated borrowers are often in the early stages of getting divorced, and keeping separate finances is typically part of that process.

This marital flexibility is provided under federal regulations enacted by the Department of Education. But it is also mandated under statutes passed by Congress.

“In the case of a married borrower who files a separate Federal income tax return, the Secretary shall calculate the amount of the borrower’s income-based repayment under this section solely on the basis of the borrower’s student loan debt and adjusted gross income,” reads the statute governing the IBR plan.

“A repayment schedule for a loan made under this part and repaid pursuant to income contingent repayment shall be based on the adjusted gross income (as defined in section 62 of title 26) of the borrower or, if the borrower is married and files a Federal income tax return jointly with the borrower’s spouse, on the adjusted gross income of the borrower and the borrower’s spouse,” reads the statute governing income-contingent repayment plans, which includes ICR and PAYE.

The use of the word “shall” in the statute typically indicates that the directive by Congress is mandatory, not discretionary.

Trump Administration Says It Will Revise Plans To Calculate Student Loan Payments With Spousal Income

But in a declaration filed by Acting Under Secretary James Bergeron on Friday, the Trump administration indicated that beginning next month, the Department of Education will calculate the monthly income-driven payments for married student loan borrowers based on the combined income of the borrower and their spouse, regardless of their marital tax filing status or separation.

“Education expects that by May 10, 2025, servicers will implement the treatment of spousal information for ICR, PAYE and IBR such that married borrowers filing separate income tax returns or separated from their spouses will have spousal income counted for the purposes of calculating monthly payment amount under IDR plans, which is a required consequence of the Eighth Circuit’s opinion directing a broadened preliminary injunction,” said Bergeron.

However, the 8th Circuit’s ruling on the SAVE plan was limited only to certain Department of Education regulations governing SAVE and elements of the other income driven repayment plans. While the enjoined regulations touch on the issue of marital status and family size for purposes of calculating monthly payments under income-driven plans, the 8th Circuit did not enjoin any statutory provisions of these plans that were created by Congress.

Calculating a borrower’s student loan payment based on their combined income with their spouse could have catastrophic financial consequences. Many borrowers have already incurred higher tax obligations by filing their taxes separately based on the assurance that their spouse’s income would be excluded from the payment calculation. Now, if the Trump administration follows through with its statement, these borrowers could also have much higher monthly payments, on top of this additional tax liability, during a time of heightened economic uncertainty.

Next Step In Legal Battle Over Affordable Student Loan Repayment Plans

Bergeron’s declaration was filed in conjunction with the Trump administration’s opposition to the AFT’s motion for a temporary restraining order. The AFT wants the court to force the Department of Education to reopen income-driven repayment plans.

The department “unlawfully shut down access to income-driven repayment plans for student loan borrowers,” said the AFT’s in its motion filed last month. “The defendants’ actions should be enjoined under the Administrative Procedures Act because it is in excess of the defendants authority and is arbitrary and capricious. The plaintiff and its members will suffer imminent and irreparable injury should the unlawful shutdown of the plans be permitted to continue.”

In its opposition filed on Friday along with Bergeron’s declaration, the department argues that it is simply complying with the 8th Circuit’s order and intends on resuming processing for income-driven repayment plans by May 10th.

“The Department fully intends to continue offering income-driven repayment plans on terms authorized by Congress and permitted by the courts,” says the opposition. “Indeed, updated online and paper applications for income-driven repayment plans have already been published, and the Department anticipates that its servicers will restart their processing of those applications no later than May 10, 2025.”

But the question of how married student loan borrowers will be treated remains an open question, given the declaration that appears to directly contradict federal statute. The AFT has not yet filed a formal response to the Department of Education’s opposition or Bergeron’s declaration. A key court hearing on the AFT’s motion is scheduled for Thursday. In the meantime, millions of married student loan borrowers will be holding their breath.