A change in how income-driven repayment (IDR) plans are calculated may give millions of married student loan borrowers a financial break. The Department of Education plans to update how it handles spousal information when calculating monthly payments. This decision was revealed in a revised court filing reported by Forbes.
What’s Changing in the IDR Plans?
Under the revised plan:
- Repayment calculations will now count spouses as part of family size instead of automatically including their income.
- This change applies to borrowers using Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), and Pay As You Earn (PAYE) plans.
- The update will affect married borrowers who file taxes separately or live apart from their spouses.
When Does the Change Take Effect?
The Department of Education expects loan servicers to implement this by May 10, 2025. This change could lower monthly payments for many borrowers whose spouse’s income previously raised their repayment amount..
The Importance of It
Borrower groups criticized the SAVE Plan and filed lawsuits related to the Biden administration’s broader student debt reform program. This follows those actions. A judicial ban on the SAVE Plan caused a temporary suspension of online IDR and debt consolidation applications.
Borrowers can now anticipate more fair assessments that take into account their unique financial circumstances as servicers continue to process IDR applications, particularly for married borrowers handling their college debt alone.
- By the end of 2024, 42.7 million Americans are expected to owe an estimated $1.64 trillion in federal student loan debt.
- To make affordable monthly payments, a lot of people utilize IDR programs.
- As student debt delinquencies increase and doubts about the worth of a college degree deepen, the change may provide much-needed respite.
Source: Fox Business
