Filing taxes separately vs. jointly for IBR with Mohela after SAVE plan rejection

This is definitely something to consider carefully! For IBR, filing separately can often lower your payment because they'll only count YOUR income rather than household income. The IBR calculation is generally 15% of your discretionary income (the difference between your adjusted gross income and 150% of the poverty line). The loan simulator on studentaid.gov can help you compare scenarios. But here's the important part - filing separately usually increases your tax burden significantly. You lose several tax benefits like student loan interest deduction, education credits, child tax credits (not applicable in your case), and potentially higher tax brackets. You need to calculate if the loan payment savings outweigh the tax increase. I did this calculation myself last year and found I'd save about $230/month on my loan payment but pay $3,100 more in taxes annually - so it wasn't worth it for me. But everyone's situation is different!

my wife & i did separate filing last yr for her IBR. saved like $280/month on loans but paid about $2800 more in taxes so it was barely worth it. depends on yr income gap tbh. bigger the gap better it works usually

DONT DO IT!!!! Filing separately cost us $4K MORE in taxes last year and only saved me $175/month on my loan payment. Total ripoff! The government wins either way. They either get more money through your loan payment OR through higher taxes. It's a scam.

I work as a financial advisor who specializes in student loan repayment strategies, and this question comes up frequently. Here's what you need to know: 1. For IBR specifically, filing separately will exclude your spouse's income from the calculation, potentially lowering payments substantially. 2. However, the tax implications are significant: - Loss of student loan interest deduction (up to $2,500) - Higher tax brackets in many cases - Loss of IRA deduction if income is within certain ranges - Loss of various credits 3. The best approach is to calculate both scenarios: - Use the Loan Simulator at studentaid.gov to determine payment differences - Use tax software to run a projection of your taxes both ways One resource many of my clients find helpful is the Married Filing Separately calculator at studentloanplanner.com which shows the breakeven point. Generally, filing separately works best when there's a very large income disparity AND a high loan balance. But each situation is unique.

I'd like to add something nobody has mentioned yet - if you're planning to pursue PSLF (Public Service Loan Forgiveness), then the calculation changes significantly. In that case, minimizing payments through filing separately can make much more sense since you're aiming for forgiveness after 120 payments. If you're not doing PSLF, then you need to consider the full loan term. Are you pursuing PSLF by any chance?

has anyone actually called Mohela to discuss this??? their customer service people can run the numbers for both scenarios for you. Dont trust random internet people lol

I think everyones overlooking something obviuos - what about just doing PAYE instead of IBR? Payment cap is 10% instead of 15% of discretionary income and you still get the option of filing separately to exclude spouse income. Might be better than IBR for your situation?

Another thing to consider - if your income ever increases significantly, IBR payments are capped at what you would pay on the 10-year standard plan. So there's a ceiling to how high they can go, which is nice peace of mind.

Based on everything in this thread, here's what I recommend: 1. Use the Loan Simulator on studentaid.gov to compare IBR payments with joint vs. separate filing 2. Use tax software (even free versions) to run a projection of your taxes both ways 3. Subtract the difference in tax liability from the annual loan payment savings 4. Look into PAYE/REPAYE as alternatives if you qualify 5. Consider if your income is likely to change significantly in the near future For most people with a moderate income gap between spouses, filing separately rarely saves enough on loan payments to offset the tax disadvantages. But your specific numbers might tell a different story.

One more thing to consider - if you do decide to file separately, make sure you understand the timing. You'll need to file your taxes separately for the tax year that corresponds to the income information you're providing on your IBR application. So if you're applying for IBR now and using 2024 tax information, you'd need to file separately for 2024 taxes (which you'll file in early 2025). Also, keep in mind that you can switch back to filing jointly in future years if your situation changes - you're not locked into separate filing forever. But you'd need to recertify your income annually for IBR anyway, so you can reassess the joint vs. separate decision each year based on your current circumstances. The key is running those numbers as others have suggested. In my experience helping friends with similar situations, the break-even point usually requires either a large income gap between spouses OR a very high loan balance relative to income. Good luck with your calculations!

Just wanted to add another perspective as someone who went through this exact decision recently! I was in a similar boat with Mohela after SAVE plan issues. What really helped me was creating a simple spreadsheet with three columns: current joint filing scenario, separate filing loan payments, and separate filing tax impact. Here's what I learned that wasn't mentioned yet - when you file separately, you also lose the ability to deduct IRA contributions if your income is above certain thresholds (even if you could deduct them when filing jointly). This was another $1,200 in lost deductions for us. Also, don't forget about state taxes! Some states have additional penalties for married filing separately that can add up. I'm in California and this added about $400 to our state tax bill. After running all the numbers, we ended up staying with joint filing and instead focused on increasing our 401k contributions to lower our AGI for the IBR calculation. Sometimes there are other ways to reduce your discretionary income calculation that don't involve the tax filing status change. The studentaid.gov loan simulator is definitely your best friend here - just make sure you're looking at the total cost over the life of the loan, not just the monthly payment difference.

I've been following this thread closely since I'm dealing with a similar situation after my SAVE plan got rejected too. What really struck me from reading everyone's experiences is how much the numbers can vary from person to person - some saved money overall, others lost thousands. One thing I wanted to add that I learned from my tax preparer: if you do decide to file separately, make sure you understand how it affects your standard deduction. For 2024, if one spouse itemizes deductions, the other spouse MUST itemize too (they can't take the standard deduction). This could potentially increase your tax prep complexity and costs. Also, has anyone mentioned the impact on health insurance premiums if you get coverage through the ACA marketplace? Filing separately can affect your eligibility for premium tax credits since they look at household income differently. @Kendrick Webb - given all the complexity everyone's outlined here, you might want to consider consulting with a tax professional who has experience with student loan repayment strategies. The cost of that consultation could easily pay for itself if it helps you avoid a costly mistake. Some CPAs even offer free consultations during tax season.

I went through this exact decision last year and wanted to share what worked for me. Like you, I was paying over $600/month and it was brutal. I ended up filing separately and it dropped my IBR payment to about $380/month - so roughly $220/month savings. BUT (and this is important) our tax bill went up by about $2,400 for the year. So my annual savings on loan payments was $2,640, minus the $2,400 extra in taxes = only $240 net benefit for the entire year. Hardly worth the hassle. The real game-changer for me was what someone else mentioned - maxing out my 401k contribution. I increased it from 6% to 15% of my salary, which lowered my AGI significantly. This reduced my IBR payment to around $420/month even when filing jointly. So I got most of the payment reduction without the tax penalties. If you haven't already, definitely look at increasing retirement contributions first. It's a much cleaner way to reduce your discretionary income for the IBR calculation, and you're actually building wealth for your future instead of just shuffling money around between loan payments and taxes.