To: U.S. Department of Education; Negotiated Rulemaking Committee

From: Suzanne Martindale, Toby Merrill, Shannon Sheaff, Johnson Tyler 

Prepared with: Persis Yu, National Consumer Law Center 

Date: April 8, 2015 

Re: Married Borrowers

 The Department has proposed to require married student loan borrowers to provide both 

spouses’ income for REPAYE calculations, regardless of their tax filing status. Currently a 

borrower who files separately can exclude a spouse's income from all other income-driven 

repayment plan calculations. We oppose this proposal. 

 Removing the option for married borrowers to file their taxes separately and count only 

the borrower’s AGI will substantially harm some of the most vulnerable borrowers and is 

antithetical to the President’s goal of targeting struggling borrowers. 

As described in detail below, there are many legitimate reasons why low-income 

taxpayers choose to file their taxes separately, often at great financial cost. Requiring these 

borrowers to provide their spouse’s income to calculate their income-driven repayment amount 

will have disastrous effects, from the administrative nightmare of trying to determine an 

uncooperative spouse’s income to potentially compromising the safety of survivors of domestic 

abuse. 

 

 Moreover, this “fix” is unnecessary. According to statements made by Department 

negotiators, roughly 4% of taxpayers file as married filing separately.1

 Yet, only 2% of 

borrowers in an income driven repayment plan file separately. This suggests that not only are 

people not choosing this filing status in greater numbers to avoid student loan payments, but in 

fact a disproportionately low number of people are choosing this option. As will be explained 

further, for most borrowers, filing separately and excluding a spouse’s income from the student 

loan payment does not result in a financial gain. Although there may be a small number of 

borrowers for whom this option does provide a benefit, they represent a tiny fraction of student 

loan borrowers and should not dictate good student loan policy. 

Therefore, we recommend that the Department use PAYE’s existing regulatory language 

to calculate the repayment amount for married borrowers who file separately. We suggest that 

the Department promote consistency by excluding from its calculation of family size the spouses 

of married borrowers who file separately and exclude their spouses’ income.

There are Multiple, Legitimate Reasons for Low-Income Married Taxpayers to File Separately. 

Physically but Not Legally Separated 

Under the tax code, married taxpayers who are not legally separated must file as married 

even though they are no longer living together.2 However, depending on the state, obtaining a 

 

1 Statement by Brian Siegel, U.S. Department of Education, Negotiated Rulemaking, Session 1, Feb. 24, 2015. 2 IRS, Publication 17 Filing Status (2014) http://www.irs.gov/publications/p17/ch02.html. The exception is 

taxpayers who qualify as head of household.
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separate maintenance decree can be complicated and expensive. Few of our low-income clients 

have the resources to get legally separated. 

Furthermore, for our clients experiencing domestic violence, obtaining a separate 

maintenance decree may not be possible due to safety concerns. These borrowers do not have 

access to their spouse’s income, yet are married under the law. Calculating these borrowers’ 

income-driven repayments amounts by including the income of a spouse with whom they are no 

longer living will impose an unnecessary hardship. 

Spouse’s Income is Unavailable 

 In order to file a return jointly, both spouses must agree and sign the tax return.3

 A 

spouse cannot be compelled to complete a joint return or to provide his or her income 

documentation to the other spouse. Where one spouse refuses to (or otherwise does not) provide 

income information, the other spouse must file separately. 

Some of these taxpayers are in violent or otherwise abusive relationships. Other spouses 

simply maintain separate finances. 

Requiring borrowers who do not access to their spouses’ income to report this 

information will put these borrowers in an impossible situation. Neither the Department nor the 

borrower has the ability to compel a spouse who is not liable on a loan to disclose her income 

information. 

Spouse’s Income is Unreliable

 When a taxpayer signs a tax return, she is responsible for any liability on that return, even 

if it is due to a spouse’s mistake or omission.4

 Some married taxpayers choose to file separately 

because they do not trust the veracity of the spouse’s reported income. This situation can arise in 

situations where one spouse has nontraditional, inconsistent, or cash-based employment. Like 

the situation described above, these borrowers will be in an impossible situation if required to 

provide their spouses’ income. All Department of Education forms are signed under penalty of 

perjury. A borrower who has reason to believe that her spouse’s stated income is inaccurate 

cannot legally provide it to calculate his or her payment amount. 

Negative Tax Consequences Already Deter Student Loan Debtors From Filing Separately Except 

When Unavoidable. 

 The Department has expressed concern that married borrowers will choose to file their 

taxes separately in order to reduce their student loan payments. An examination of the tax 

consequences of filing separately shows that this fear is unfounded. 

 

3 IRS, Publication 17 Filing Status (2014) http://www.irs.gov/publications/p17/ch02.html. 4 Center for Economic Progress, Tax Relief for Divorced and Separated Taxpayers, 

http://www.economicprogress.org/sites/economicprogress.org/files/divorced_separated.pdf
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 According to the IRS, taxpayers generally pay more combined tax on separate returns 

than they would on a joint return.5

 This is because many tax benefits and credits are not 

available to married taxpayers who file separately. Consequences of filing separately include:6

• The tax rate generally is higher than on a joint return. 

• Neither spouse can take the credit for child and dependent care expenses in most cases. 

• Neither spouse can take the earned income credit. 

• Neither spouse can take the education credits (the American opportunity credit and 

lifetime learning credit), the deduction for student loan interest, or the tuition and fees 

deduction. 

 The following examples show the effect of filing separately for five different income 

levels. These examples show the total amount paid through student loans and the amount paid in 

taxes depending on tax filing status. In each example, only one spouse has a student loan. The 

balance on the student loan is $30,000,7 and the loan has a 5% interest rate. Where the spouses’ 

incomes differ, the loan belongs to the spouse with the lower income. Each family has two 

children, one requiring full time childcare. In all scenarios, the standard deduction is taken along 

with the applicable interest rate deduction (interest rates calculated based upon second year of 

repayment) and childcare expenses. In all scenarios, the negative tax consequences of filing 

separately are greater than any savings on the student loan payments. 

Examples

Scenario 1

In this scenario, both spouses have $10,000 in income. Due to their low income, they qualify for 

a full childcare voucher and did not make payments on their student loan interest. 

Tax liability8 Required student loan payments9

Joint -$7,460 (refund) $0

Separate -$1,050 (refund) $0

Difference -$6410 (refund) $0

 

5 IRS, Publication 501, Exemptions, Standard Deductions, and Filing Information (2014), 

http://www.irs.gov/publications/p501/ar02.html. 6 For a full list of the tax consequences of filing separately see: IRS, Publication 501, Exemptions, Standard 

Deductions, and Filing Information (2014) *Special Rules, 

http://www.irs.gov/publications/p501/ar02.html#en_US_2014_publink1000220768. 7 According to the Brookings Institute, less than 75% of borrowers have more than $29,000 of student loan debt. 

The average student loan debt of graduation seniors is $29,400. Rounding those number to $30,000, we assume will 

provide the best picture for most student loan borrowers. 

Beth Akers, Brookings Institute, Typical Household Student Loan Debt (July 2014), 

http://www.brookings.edu/research/papers/2014/06/19-typical-student-loan-debt-akers; TICAS, Quick Facts About 

Student Debt (March 2014) http://ticas.org/sites/default/files/legacy/files/pub/Debt_Facts_and_Sources.pdf. 8 Calculated using H & R Block, Tax Return Calculator & Estimator, http://www.hrblock.com/get-answers/taxcalculators.html. 9 Calculated using U.S. Department of Education, Federal Student Aid, Repayment Estimator, 

https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action. 
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This family will lose $6410 by filing separately and gain no student loan benefit. 

Scenario 2

In this scenario, both spouses have $20,000 in income. Due to their moderately low income, 

they qualify for a partial childcare voucher and paid $1000 in childcare expenses. Based upon 

the size of the loan payment, the loan is negatively amortizing and all of the payments ($360) 

went towards interest. 

Tax liability Required student loan payments

Joint -$2,964 (refund) $360

Separate -$781 (refund) $0

Difference -$2,183 $360

This family will lose $1,823 by filing separately.

Scenario 3 

In this scenario, one spouse has $30,000 in income while the other spouse has $10,000 in 

income. Due to their moderately low income, they qualify for a partial childcare voucher and 

paid $1000 in childcare expenses. Based upon the size of the loan payment, the loan is 

negatively amortizing and all of the payments ($360) went towards interest. 

Tax liability Required student loan payments

Joint -$ 2,964 (refund) $360

Separate -$661 (refund) $0

Difference -$2,303 $360

This family will lose $1,943 by filing separately.

Scenario 4

In this scenario, one spouse has $120,000 in income while the other spouse has $30,000 in 

income. Due to their high income, they do not qualify for a childcare voucher and will claim the 

maximum possible childcare expense, $6000. Based upon the size of the loan payment (for 

filing jointly), approximately $1350 will have been paid toward student loan interest in the 

second year of repayment.

Tax liability Required student loan payments

Joint $20,850 $3,816 ($318 monthly)

Separate $25,764 $0

Difference $4,914 $3,816

This family will lose $1,098 by filing separately. 
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Scenario 5

In this scenario, one spouse has $70,000 in income while the other spouse has $50,000 in 

income. Due to their high income, they do not qualify for a childcare voucher and will claim the 

maximum possible childcare expense, $6000. Based upon the size of the loan payment (for 

filing jointly), approximately $1350 will have been paid towards student loan interest in the 

second year of repayment.

Tax liability Required student loan payments

Joint $11,575 $3,816 ($318 monthly)

Separate $13,413 $1992 ($166 monthly)

Difference $1,838 $1,824

This family will lose $14 by filing separately.

The Department Should Use Procedures Currently in Place for Married Borrowers Filing 

Separately. 

For the reasons reviewed in this memo, we ask the Department to remove the 

burdensome restrictions it proposed for married borrowers filing separately, while excluding 

spouses of married borrowers filing separately from its calculation of family size. While we 

appreciate the Department’s suggestion of an application to help handle some of the additional 

hardship that would ensue for victims of domestic violence, we believe that such a solution 

would be inadvisable and insufficient. First, it would only address a subset of vulnerable 

borrowers who would be harmed by the Department’s proposed change. Second, 

operationalizing a definition of domestic violence would be nearly impossible.10 We believe 

that such an application would pose an additional burden on and potentially revictimize some of 

the most vulnerable borrowers. A separate application would also impose additional delays, and 

would put servicers and the Department in the position of evaluating and adjudicating difficult 

and deeply personal circumstances of individual borrowers. 

 

10 The Department of Justice defines domestic violence as domestic violence as a pattern of abusive behavior in any 

relationship that is used by one partner to gain or maintain power and control over another intimate 

partner. Domestic violence can be physical, sexual, emotional, economic, or psychological actions or threats of 

actions that influence another person. This includes any behaviors that intimidate, manipulate, humiliate, isolate, 

frighten, terrorize, coerce, threaten, blame, hurt, injure, or wound someone. U.S. Dep’t of Justice, Office of Violence 

Against Women, Domestic Violence (July 23, 2014), http://www.justice.gov/ovw/domestic-violence.