If you haven’t already heard, there is a new student loan repayment program that replaced the REPAYE program. It is called the SAVE program. It has better terms than REPAYE and I wrote a diddy about it here if you want to learn more about it. I like it so much that I switched our aggressive repayment strategy to the SAVE program for the time being! The pandemic changed my focus from debt annihilation to growing my wealth and I have been enjoying this track. If I switched gears again when the loans came back, I would disrupt my momentum like I did in 2020. I am just not ready to relive that. The snowball is snowballing, my friends. Don’t get in the way. Now, there are some tax filing changes we had to make in order to get the full benefits of SAVE’s terms. Did you know about it?
Tax Filing Changes for the SAVE program
Previously under REPAYE, monthly payments were calculated as a percentage of the household income (the borrowers and their partner’s combined). The SAVE program has the ability to consider only the borrower’s income, even if they are married. Since student loan programs work best by paying the LEAST amount possible every month, SAVE helps borrowers by reducing what the borrows pay back during the program period. However, the minimum monthly payment is calculated from the most recent tax return. If you are married and in a two income household, you need to file Married Filing Separately in order to only count one income. Otherwise, the SAVE program will count your spouse’s income when deciding how much you pay back.
This is a painful point for us in 2024. My repayment starts in April, and the last tax filing which for us was 2022. And yes, we filed Married Filing Jointly at the time since SAVE didn’t exist until Fall 2023. My 2023 tax return will not be filed in time for them to recalculate my 2024 repayments. My husband and I have similar incomes, so for this year, we will be paying a larger sum than I would like under SAVE. Moving forward, we will file Married Filing Separately, which will cause us to lose out on a few thousand dollars in tax benefits. But it will cut our monthly repayments to my student debt in half, and save us more money in the long run.
Save Money with The Student Loan Planner
I think this was worth mentioning. You could be losing thousands of dollars if you aren’t considering your student loan repayment when you file taxes. Since I am not a student loan repayment specialist (only an avid geek about the subject), I would highly recommend professional services when making financial moves around student loans. It is nuanced, sometimes convoluted, and sometimes vague. But with the right guidance, you could be saving thousands of dollars. My favorite advisors are with Student Loan Planner. They saved me tens of thousands of dollars, just by pointing me to the correct repayment plan. Schedule a call with the Student Loan Planner team to see how they can help you. Your financial future rides on the way you handle student debt.
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