A Couples Approach to Student Loans

July 29, 2010 — -- Week in, week out, readers e-mail me with questions about crushing student loan debts and how to find relief.

Honestly, in most cases, the financial damage has been done and I often feel there's not much help I can offer. But an Illinois woman I heard from not long ago raised an issue that, as it turns out, underscores a recent change to a federal student loan program. It could be the solution she and her husband -- and many other young couples just like them -- are looking for.

Q: My husband and I have recently finished our schooling and are trying to research the best way to tackle our student loans. I am a teacher and have obtained two master's degrees and wondered if I am able to consolidate the two loans. Also, being that my husband and I both have student loans, can we qualify for the Income Based Repayment Plan? If so, is that something I should pursue separately or combined? -R.V., Joliet, Ill.

A: R.V., there's good news for you and your husband, thanks to a change in federal law that could lower your monthly payments as you begin your careers and start chipping away at that debt.

On July 1, a change to the Income Based Repayment program equalized the treatment of single and married borrowers. The program, now a year old, limits monthly payments for borrowers working in lower-paying jobs.

Previously, the Income Based Repayment program factored in the dual income of a married couple when determining the eligibility of each spouse, but then did not take into account the couple's joint student-loan debt.

That meant married couples could be making monthly payments that were double what two single people in the same financial situation would be paying. Under the old rules, the married couple appeared to have a greater ability to pay down their loans compared to a comparable unmarried couple living together.

Talk about a huge incentive to avoid marriage. I can't imagine a bigger one for young, college educated couples.

Now, married borrowers who file their taxes jointly will have both their joint income and their joint debt factored in when determining whether the spouses qualify for lower monthly loan payments.