The RAP plan could increase the "marriage penalty" on student loans in the U.S.
Married borrowers of federal student loans in the U.S. may face higher monthly payments if they file a joint tax return. According to CNBC, combining a couple’s incomes can significantly increase payments under income-driven repayment plans.
Financial advisor Douglas Bonaparte believes that the new Repayment Assistance Plan (RAP) could exacerbate the so-called “marriage penalty” for such borrowers. He says that marriage can immediately and significantly change a monthly payment, even if the borrower’s income hasn’t changed. According to the Congressional Research Service, more than 42 million Americans have student loans, and the total debt exceeds $1.6 trillion. Higher education expert Mark Kantrowitz estimates that about half of these borrowers are married.
CNBC illustrates the difference between joint and separate tax filings using the example of the Income-Based Repayment (IBR) plan. A wife with $110,000 in debt and an annual income of $50,000, filing a joint return with her husband—who earns $70,000 and has no student loans—would pay $730 per month. If they filed separately, her payment would be $146.
For more current news, follow the UA.News Telegram channel.
If the husband also has student loans—for example, $75,000—the difference between the options is smaller. On a joint return, the couple’s combined monthly payment would be $730, while on separate returns, it would be $459. In this case, the annual savings drop to approximately $3,300, compared to about $7,000 when only one spouse has debt.
The RAP plan, available starting July 1, determines the payment based on adjusted gross income (AGI). Unlike other repayment programs, it does not set aside a portion of income to cover basic living expenses. Monthly RAP payments typically range from 1% to 10% of AGI, and the percentage used for the calculation increases as income rises. According to Kantrowitz’s example, a borrower with an income of up to $30,000 would pay $50 per month at a 2% rate. If they file a joint tax return with a spouse earning $45,000, the calculation would shift to a 7% rate, and the payment would increase to approximately $437.50.
At the same time, filing separate tax returns may increase tax expenses. In particular, married couples who file separately cannot take advantage of the tax deduction of up to $2,500 per year for interest on student loans. Experts advise comparing potential savings on loan payments with the loss of tax benefits. For the Standard and New Tiered Standard repayment plans, filing status does not affect the payment amount, as it is not based on income.
