Married filing jointly vs. separate with student loans on income-based repayment

Thank you for the detailed response! I didn't realize I'd lose access to the student loan interest deduction by filing separately - that's definitely something to consider. About how much do you think the child tax credit would be worth compared to keeping my IBR payments low? I have about 40 payments left before forgiveness.

The Child Tax Credit for 2024 (filing in 2025) is worth up to $2,000 per qualifying child under 17, with up to $1,600 being refundable through the Additional Child Tax Credit. This is definitely substantial. For your IBR payments, you'd need to calculate the difference between what you'd pay filing separately versus jointly for those remaining 40 months. If your monthly payment would increase by $200 when filing jointly, that's $8,000 more in payments before forgiveness. If the tax benefits of filing jointly (including child tax credit, student loan interest deduction, etc.) exceed that amount, filing jointly might make more sense. If you're on PAYE or IBR rather than REPAYE, filing separately could still be advantageous.

Does this tool actually look at the student loan forgiveness angle? I've been trying to figure this out for years and every tax person I've talked to doesn't understand how PSLF interacts with taxes. They just tell me to file jointly for the tax breaks without considering what happens to my payments.

I'm a little skeptical about these online calculators. How accurate was it for your specific situation? Did it actually match what your loan servicer calculated for your monthly payment? I've been burned before with tools that gave me completely wrong estimates.

It specifically analyzes PSLF scenarios and shows how each filing status affects your progress toward forgiveness. It actually pulls from the same formulas loan servicers use to calculate IBR/PAYE payments based on your AGI. The numbers matched up almost exactly with what my loan servicer calculated after I filed. The difference was maybe $3-4 per month. It's definitely more accurate than the basic calculators out there because it factors in specific details about your loan type, repayment plan, and tax situation all together. It shows you the total cost over your remaining PSLF period, not just the next payment.

How exactly does this work? Do they just call the regular customer service line but somehow get through faster? My loan servicer's hold times are ridiculous, and half the time I get disconnected after waiting an hour.

Yeah right. No way some service can magically get you through phone queues faster than everyone else. The government call centers are all backed up because of understaffing. Sounds like a scam to me.

It works by continuously calling and navigating through the phone tree for you until it gets a spot in line, then it calls you when it's about to connect to a representative. It's basically automating the annoying part of waiting on hold. They don't "skip" the line - they just handle the tedious part of staying in the queue. For my loan servicer, the average wait was 2.5 hours, but I got a callback in about 45 minutes without having to stay on the phone the whole time. The rep I spoke with was incredibly helpful with explaining exactly how my loan servicer would calculate my payments under different filing statuses.

Omg thank you for mentioning this! I just checked and I am on REPAYE. I had no idea they would count my spouse's income regardless of filing status. Do you know if switching to PAYE would reset my payment count for PSLF?

Switching from REPAYE to PAYE should not reset your payment count for PSLF. All qualifying payments made under any eligible repayment plan count toward your 120 payments. The key is making sure PAYE is available to you - it has some eligibility requirements that REPAYE doesn't have. The main thing to watch for is that your switch is processed correctly and that your servicer properly tracks your previous qualifying payments. I'd recommend getting written confirmation that your payment count will carry over when you request the switch. Also consider your payment amount - PAYE caps payments at 10% of discretionary income while REPAYE has no cap, so run the numbers to make sure it makes sense for your situation.

The child tax credit is worth up to $2,000 per qualifying child, while the student loan interest deduction is capped at $2,500 but that's just a deduction (not a credit). At your income levels, a $2,500 deduction might only save you about $550-600 in actual taxes (assuming 22-24% tax bracket). So the child tax credit is potentially worth significantly more than the student loan interest deduction. But the real question is whether those tax benefits outweigh the savings from lower IBR payments over the remaining PSLF period.

This is really helpful context! I hadn't even thought about state tax implications. We're in California, so I'll need to look into how they handle federal filing status differences. You're absolutely right about updating our income with the loan servicer - we both got raises in the past few months but I haven't updated that information yet. I was actually kind of hoping to delay that since it would increase my payments, but I know that's not the right approach long-term. Do you happen to know if there's a specific time of year that's better to update income information with loan servicers? I'm wondering if I should wait until after I figure out my filing status for this year's taxes or if I should update it now regardless. Also, the point about EITC is interesting - even though we probably won't qualify, it's good to know there might be other credits I haven't considered that could be affected by filing separately.

Regarding timing for updating your income information - you typically have to recertify annually anyway, so the timing depends on your recertification date rather than when you choose to update. However, if your raises were substantial, the loan servicer may eventually catch up through tax transcript reviews. For California specifically, they generally follow federal filing status, so if you file separately federally, you'll likely file separately for state taxes too. California doesn't have its own version of some federal credits, but they do have their own calculations for things like standard deductions when filing separately. One strategic consideration: if your annual recertification is coming up soon, you might want to get your tax filing decision sorted first. That way you'll know what AGI to report to your loan servicer. If your recertification isn't due for several months, you have more flexibility to plan. Also, since you're in California with those income levels, make sure to factor in the state tax implications of the child tax credit and other federal benefits when comparing filing jointly vs. separately. California's high state tax rates mean the actual value of federal deductions and credits can be amplified.