Marriage Affect on Student Loans

[Anonymous]

Hey everyone, hope all is well!

I'm in the process of buying a house. We put 20% down. Mortgage will be about 465 a month. With taxes and insurance in escrow total bill will probably be mid 600s.

My fiance has a little under 60k in student loans while I have 0. We both have college degrees and earn a little less than 70k a year combined in our first "real" jobs.

We would like to get married soon but I am worried about affording the house if her payments are increased due to filing jointly. I'm thinking of we file separately we will decrease her payments which could be beneficial vs the tax savings of filing jointly. We plan to overpay the mortgage and her loans both as we have significant savings (about 20k) and I have investments (a little over 30k not including my retirement accounts).

Was hoping to get some input from the community on student loan repayment and joint vs married bu filing separately statuses.

I know that the income based repayment plan goes out the window if the payment would be higher than the original non income based amount. What I'm not sure about is if they will adjust that base amount based on both our salaries.

She cares a lot about the piece of paper legally marrying us while I don't see it as changing the relationship at all. I would be perfectly fine buying our house and starting a family without the legal label if that would set us up better financially and provide us a less stressful lifestyle while we are starting out. I would like to give her what she wants as well but not at the price of stressing our finances and ability to meet desired life goals that could drive us apart down the road.

Sorry for the wall of text and any input, thoughts, or further considerations are greatly appreciated!

[Shooting-For-800]

I cant imagine her student loan payments will dramatically increase. 

You will save money on income tax.

Even if you have to pay $100-$200 more on student loans, you will be better off married since you have to pay the loans anyway and they will be accumulating compound interest on the balances.

Again, I doubt they will dramatically increase based on your current income level assuming she does not make dramatically less than you.

You can find SL calculators online to get a guestimate.

Happy wife, happy life.

GL.

[calyx]

My boss and his wife file separately because of student loan repayments - but he makes a whole lot more than your combined incomes (and his wife's is far less), so it's a pretty significant impact for them - they've worked out the math (I think it's nuts for the reasons Shooting-for-800 says - neither are on PSLF/Repaye, so they'll just end up paying more in the long run).  

You can speak with a tax/financial advisor to see how the math works out, or you can do the math yourself - there are repayment calculators on the Dept of Ed website that can calculate the differences for you, and also use the IRS tax calculator for 2019 to figure it out.

Good luck.

[Anonymous]

To determine what would work best there are a lot of things you have to look at. $60k is a large loan(s). If let's say your income is both at $35k. If it's only undergraduate loans, and if your income will not be increasing significantly or if you could have a gap in employment sometime in the future, you could possibly benefit from loan forgiveness (~20 years). Graduate portions are 25 years, so that's unlikely. In that case, you'll probably be better off filing separately and paying the payment on $35k income. To complicate matters, it differs by plans.
You mentioned you won't qualify for IBR. This is not true. If you are already on IBR you are grandfathered in (unless you miss a re-certification?). Even if you're income exceeds the limit, you can stay on it. This is the plan you benefit from filing separately on because REPAYE does not acknowledge a filing separately. If you're married, you're married. REPAYE also takes into account your spouses loans; she doesn't have any. So you'll basically be making payments on REPAYE of an income of $70k no matter what, and nothing to offset it.
Now let's say you want to pay off the loan instead of aiming for forgiveness (likely if you're both projected to have a steady rise in income). The minimum payments won't matter in the sense that the quicker you pay off the loans the better. It is often still suggested to chose the lesser minimum payment to start when you're also building up an emergency fund, house down payment, etc. FHA loans also take into account the amount of your monthly payment.
In short, you'll have to look at your potential payments, taxes, income, selected IDR plan, and financial goals to determine if filing jointly or separately will be more beneficial to you two each year.
"The math behind filing separately..."
https://thecollegeinvestor.com/17807/the-math-behind-married-filing-separately-for-ibr-or-paye/

[Anonymous]

It is all undergrad. It is her loan not mine, I have no debt. We already have 8 months emergency savings, conventional loan with 20% down already covered separately from investments and savings.

She is currently on an income based plan of some type, I will have to double check but we found out she's set for next 12 months at 22 dollars a month due to a college job server salary being considered for repayment at the moment.

The invesents I am in currently have a lifetime return over about 13% so we plan to dump all money possible into retirement funds as returns over next 40 years should double the interest on her student debt.

I plan to meet with either a tax or financial planner to judge going forward what the best plan of action is but know the community here is knowledgeable and some may have been in similar situations.

[Anonymous]

I second the notion of using the online calculators for student loan repayment... she can sign in and use her loans specifically- so the estimates they state will be very accurate. It allows you to change the scenarios so that you see the differences in payments (married, single, joint, separate, etc).

You might be pleasantly surprised on how low her payments would be (and she can always pay extra when you guys have extra).

Good luck!

[Anonymous]

My apologies, I thought you said your loan.
I haven't been in that situation myself, but there's are several threads of people who were. I can provide a few links if it would be helpful.
There problem with comparing is that each couple's situation is so unique. For example, in one the wife had the loans, the husband had none. The wife had a small enough income to qualify for $0 payments on her own(and would like stay that way), but her husband had a sizeable income. In that scenario, no matter what the benefit they might have from filing jointly, they should file separately. After the 20 year period her large amount of loans would be forgiven. In a different thread, both of them had a sizeable income and a smaller loan amount. There would be no benefit from forgiveness. Since they would have to pay off the loan, it was simply a matter of temporarily needing the flexibility to save money. After that, they'd throw the money at the loan to pay it down quicker. They chose planning to file separately for a few years then pay the max possible on the loan to get it paid off.

From what you said, I don't see how there would be much of a benefit from sticking to low IBR payments after the 12 months is over. IBR is of most benefit to people who can only afford low monthly payments, who will eventually qualify for forgiveness or just need the temporary benefit of saving money.
The upside is right now, at $22/ month the government is paying for half of the accruing interest remaining after her monthly payment on her subsidized loans. She might be able to extend that closer to two years if in 2020 if she a paycheck during a period she made significantly less than the rest of the year. This is in the re-certification fineprint. Her annual income would be recalculated at the lower rate. These payments would be good for another year. She would be under no obligation to report an increase in pay.
Hope this helps.