For one student loan borrower, a seemingly simple question uncovers a way to lower his student loan payments by an astonishing 79%. The question is as follows:
My wife and I are both deep in federal student loan debt and trying to figure out our repayment options. My wife’s got $400,000 in federal student loans, all from graduate school. She graduated in 2013 after four years in college, came out with a degree but went on forbearance that’s ending in about a month. I’ve got about $500,000 in federal student loans from my undergraduate education, the result of two different degrees and years of forbearances because I couldn’t make any payments. My forbearance is ending in a few months as well. Thankfully, we’ve finally got a solid combined income. She’s making about $120,000 a year, and I make about $200,000 a year We’ve got no children, but we also have no savings to speak of. My wife’s student loan bill came in and they want her to pay about $4,500 a month - there’s no way we can afford to pay that. I’m sure my loan payment is going to be even higher than that, but I’m afraid to even look. What do we do?
The question shows how difficult it is to determine your best repayment option to keep your federal student loans under control. Variables such as income, marital status, the age of the student loan and your potential career trajectory make a simple matter difficult.

Perhaps this is one of the reasons why only 17% of federal student loan borrowers were in one of the income-based repayment programs as of the end of 2014.

To combat the paradox of choice that keeps us from making a decision of which payment plan to choose, we're going to roll up our sleeves by using this question as an example. I warn you - there will be some math involved. But once we get to the end, you'll see why it was worth it.

Here are the repayment options we review in answering the question (but you'll have to listen to the episode to hear which one is the best - and why).

 

Wife's Repayment Options - Filing Separate Tax Returns

Wife's Repayment Options - Filing Joint Tax Returns

Husband's Repayment Options - Filing Separate Tax Returns

Husband's Repayment Options - Filing Joint Tax Returns

Looking Into the Future
Now let’s change it up a little. Let’s say her income rockets past his and she’s making $400,000. He’s still making $200,000 and their debt load is the same.

Wife's Repayment Options - Filing Separate Tax Returns

Wife's Repayment Options - Filing Joint Tax Returns

Husband's Repayment Options - Filing Separate Tax Returns

Husband's Repayment Options - Filing Joint Tax Returns

What You'll Learn In This Episode

* How federal student loan repayment options can shrink your monthly payments by an astounding 79%
* The loophole that gets you the lowest payment on your federal student loans and forgiveness in 20 years (even if REPAYE doesn't offer the lowest payment)
* When it makes sense to file separate tax returns, and when joint returns are the better way to go
* How you can get into REPAYE even if you have student loans from graduate school
* Why the right choice for you may not be the best option next year

 
Three Ways To Get More
You can subscribe to the podcast on iTunes, to get automatic updates every time a new episode goes live.

Join our Facebook Group to ask questions, get news updates from the world of student loans, and interact with like-minded people struggling with educational debt.

If you're looking for one-on-one professional help with your student loans, click here to learn how we can work together.