Income Contingent Repayment Plan Married Filing Separately

Another reason you may wish to file separately is to qualify for an income driven repayment plan to lower federal student loan payments.

Income contingent repayment plan married filing separately. The income contingent repayment icr plan is one of four income driven student loan repayment plans for federal student loans. Your household size stays the same but your income goes down when they calculate discretionary income. For paye the monthly payment will 74 per month with the potential for loan forgiveness of 64 424 after 240 months. Student loan repayment does not follow the traditional loan repayment methods.

If you are married but file income taxes separately only your income will be counted in determining the ibr repayment amount. It all comes down to what plan you choose and your tax filing status married filing separately or jointly. The income contingent repayment icr plan. Filing jointly means your total household income generated by both you and your spouse is taken into consideration by an income driven repayment plan.

This plan is the worst of all the income driven repayment options. Now if this couple files married filing separately on their taxes they will pay 1 174 more per year. But it opens up more repayment options for person a. Married loan borrowers could end up with a higher student loan payment than loan borrowers who are single.

If your monthly student loan payment is less than 20 of your discretionary income then your monthly student loan payment. However you may lose certain tax benefits by filing separately. With the introduction of newer income driven repayment plans icr has dropped in popularity. For example person a will now qualify for both ibr and paye.

Since the idr methods use adjusted gross income as the major factor couples need to analyze the married filing separately and married filing joint tax decision more carefully. However for three of the plans ibr icr and paye only the borrower s income will be used to calculate the borrower s monthly payment if they file taxes as married filing separately in. Let s talk about the icr plan for a second. The income based and income contingent repayment plans plus the paye plan allow married borrowers who file separately and are eligible for repayment under the specific plan to have their payments determined based on their income alone.

The icr plan will count your spouse s income only if you file taxes jointly. However married filing separately can substantially lower your loan payment explained mark struthers a certified financial planner who founded sona financial. The icr plan doesn t include your spouse s income if you file taxes separately. You should consult a tax professional if you are considering this.