Married Student Loan Borrowers Get Reprieve After Department of Education Walks Back Policy Change

2 days ago

6 6 minutes read

WASHINGTON, DC – APRIL 10: Secretary of Education Linda McMahon at a White House Cabinet meeting. The Department of Education reversed its statement on payment increases for married student loan borrowers. Getty Images

(WE) — In a major policy shift, the U.S. Department of Education on Tuesday reversed a controversial statement. The original claim suggested that married borrowers filing taxes separately would have their spouse’s income included in student loan payment calculations under income-driven repayment (IDR) plans.

This correction comes during ongoing legal battles that have disrupted the federal student loan system since February. The reversal brings clarity—and relief—for many married borrowers. Many had feared a sharp increase in their monthly payments.

Background: Married Borrowers and Income-Driven Repayment Plans

Federal student loan borrowers have several repayment options. These include Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), and Pay As You Earn (PAYE). These plans calculate monthly payments based on income and family size.

By law, married borrowers who file joint tax returns must include both incomes when calculating monthly payments. But if a borrower files separately, only their individual income is supposed to count. Their spouse’s income should be excluded.

This difference matters—especially when one spouse earns more or doesn’t have student loan debt. Filing separately might raise your tax bill. But it can also reduce your loan payment by keeping your spouse’s income out of the equation.

Legal Challenge: AFT Lawsuit Prompts Federal Scrutiny

The controversy began with a lawsuit filed by the American Federation of Teachers (AFT) in March. The AFT challenged the Department of Education‘s sweeping suspension of income-driven repayment (IDR) plan processing. The union argued that the move was unlawful and would cause serious harm to borrowers. This is especially true for those pursuing Public Service Loan Forgiveness (PSLF), which requires active enrollment in an IDR plan.

The lawsuit came after a preliminary injunction issued by the U.S. Court of Appeals for the Eighth Circuit. That ruling blocked the Biden administration’s Saving on a Valuable Education (SAVE) plan—the most generous IDR program to date. According to the Department of Education, this injunction forced a pause on all IDR-related activity. That included older programs like Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE).

Then, last Friday, Acting Under Secretary James Bergeron filed a sworn declaration in court. It signaled a surprising policy change. He said that married borrowers who file taxes separately would still have their spouse’s income included in IDR calculations. That claim immediately drew criticism from legal experts and borrower advocates. They argued it conflicted with existing federal law.

Federal Law: What the Statute Actually Says

The federal statute governing the IBR program is unambiguous. According to 20 U.S. Code § 1098e, for a married borrower who files a separate tax return, the Department of Education “shall calculate the amount of the borrower’s income-based repayment under this section solely on the basis of the borrower’s student loan debt and adjusted gross income.”

You can read the full text of the law on Cornell Law School’s Legal Information Institute.

This statutory protection ensures that borrowers filing separately are not penalized by the inclusion of spousal income in their IDR payment calculation. It was this very point that made Bergeron’s original statement so alarming.

Department of Education Reverses Course

Just days after filing the controversial declaration, the Department of Education submitted a corrected declaration to the court on Tuesday, April 15.

In the revised version, the agency clarified that it will not count spousal income for borrowers who file separately. Instead, the only change will be to how family size is calculated.

“Education expects that by May 10, 2025, servicers will implement the treatment of spousal information for ICR, IBR, and PAYE such that married borrowers filing separate income tax returns or separated from their spouses will have the spouse counted in the family size for the purposes of calculating monthly payment amount under IDR plans,” the corrected declaration read.

This means that while a spouse’s income will remain excluded for those filing separately, they will be counted toward family size. Since family size is a factor in determining how much of a borrower’s income is “discretionary,” a larger family size generally reduces the monthly payment.

Why the Confusion Happened

Much of the confusion stems from the legal chaos following the injunction against the SAVE plan. That plan, introduced by the Biden administration in 2023, significantly slashed monthly payments for many borrowers and included a more lenient family size definition that did not count a spouse in the household if the borrower filed separately.

However, since the SAVE regulations have now been blocked by court order, the Department of Education is reverting to pre-SAVE guidelines, where a spouse was counted in family size regardless of tax filing status.

A helpful summary of the SAVE plan and its legal status is available from the National Consumer Law Center.

Implications for Borrowers

This clarification is a big win for married borrowers who file separately. It means that their monthly payments under IBR, ICR, and PAYE will continue to be based only on their individual income, consistent with longstanding federal law.

In fact, many borrowers could now see lower payments due to the inclusion of their spouse in the family size calculation. For example, a borrower with an annual income of $35,000 and no dependents might see their monthly payment drop if their spouse is now included as an additional household member, lowering the percentage of income considered “discretionary.”

Borrowers can estimate their payments under various plans using the Loan Simulator tool provided by Federal Student Aid.

What Comes Next for IDR Plan Processing?

The Department of Education has confirmed that loan servicers will begin resuming applications for income-driven repayment (IDR) plans by May 10, 2025.

“Education directed its servicers to resume placing borrowers that apply for ICR, PAYE, and IBR into their respective plans as soon as possible,” said Acting Under Secretary James Bergeron in a corrected court filing.

This decision follows months of halted IDR processing. The freeze left thousands of borrowers stuck without access to affordable payments. It also delayed progress for those working toward Public Service Loan Forgiveness (PSLF).

Under the latest update, spousal income will still be excluded from monthly payment calculations if the borrower files taxes separately. However, the spouse will now count toward family size. Since family size affects how much income is considered “discretionary,” adding a spouse can lower the monthly payment.

Court Ruling: AFT’s Temporary Restraining Order Denied

Despite the Department’s prior misstep, the federal judge overseeing the AFT’s lawsuit opted not to issue a temporary restraining order. Instead, the court scheduled a status conference for Thursday to further evaluate the situation.

This suggests that while the court is giving the Department time to resume IDR processing, it will continue to monitor the case closely. The AFT has not ruled out continuing its legal challenge, especially if the Department fails to follow through on its commitments.

“Our members and millions of other borrowers rely on these income-driven repayment plans to keep their student loan payments manageable,” said AFT President Randi Weingarten in a statement. “We’ll be watching closely to make sure the Department honors its promises.”

Political Ramifications

This episode highlights how fraught and politicized the student loan system has become.

President Biden has made student loan reform a cornerstone of his education policy, championing the SAVE plan and extending forgiveness to targeted groups such as disabled borrowers and those working in public service. However, the administration has been repeatedly stymied by court challenges, particularly from Republican-led states.

The SAVE plan, which was expected to benefit millions of borrowers by slashing payments and accelerating forgiveness timelines, remains blocked under a federal court order. And now, even legacy IDR programs have been pulled into the legal vortex.

With the 2024 presidential election still fresh in memory and student loan payments back in full swing after a pandemic-era pause, borrower advocates are warning that legal uncertainty and bureaucratic missteps could erode trust in the system.

Conclusion: Clarity Amid Uncertainty

After weeks of confusion and rising anxiety, married student loan borrowers now have a clearer picture of how their payments will be calculated. The Department of Education’s correction ensures that spousal income will remain off the table for those filing separately—upholding the letter of the law and avoiding sudden financial shocks for borrowers across the country.

Still, as the legal challenges around SAVE and IDR plans continue, the broader landscape of student loan repayment remains unstable. Borrowers, advocates, and policymakers alike are closely watching what happens next—and hoping that clarity, consistency, and compassion guide the path forward.

Key Takeaways for Borrowers

Here’s what married borrowers need to know in light of the Department of Education’s correction:

Spousal income will NOT be counted in IDR payment calculations if the borrower files taxes separately.
Family size will include a spouse regardless of tax filing status.
IDR application processing for IBR, ICR, and PAYE is expected to resume by May 10, 2025.
Borrowers pursuing Public Service Loan Forgiveness should continue to ensure they’re enrolled in an eligible plan as soon as possible.

Borrowers can contact their servicer or use the Federal Student Aid contact page for help with their specific situation.

2 days ago

6 6 minutes read