Some students and residents may decide to get married during their education or training periods, and though it is no secret that marriage is a life-changing experience, it is especially important for medical students and residents to understand the ramifications it will have on their finances.
Tax Incentives
The IRS provides married taxpayers with two options when it comes to filing taxes: file a joint tax return or file as separate, but married. In general, filing separately provides fewer tax benefits than filing jointly. For example, eligibility for Education Tax incentives like the Tuition and Fees Deduction or the Student Loan Interest Deduction are not available for married couples that file separately.
Although filing jointly generally offers more tax deductions, this status may also increase the amount of the required student loan payment under some income-driven plans. Deciding how to file taxes has a far-reaching impact (greater than discussed here). It is wise to enlist the advice of a certified accountant or professional tax preparer to help provide clarity on the pros and cons of each tax filing status.
Repayment Options
Federal student loans offer flexibility during repayment by allowing borrowers to either postpone loan repayment during residency with a mandatory residency forbearance, or to repay during residency with one of the various repayment plans. Information about all the repayment plan options can be found within the Loan Repayment Options fact sheet.
Your spouse’s income may be taken into consideration when determining your monthly loan payment; it depends on the repayment plan you choose.
Revised Pay As You Earn (REPAYE) uses both spouse’s income when determining monthly payment, regardless of how taxes are filed.
Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) all use both spouse’s income if taxes are filed jointly.
For questions about specific repayment amounts and plans, and to determine how your spouse’s income may impact your monthly payment, contact your servicer.
FAFSA Considerations
The FAFSA (Free Application for Federal Student Aid) is used to determine eligibility for aid. Whether married or single, this step in the financial aid application process must be completed by anyone seeking federal financial aid assistance. For married couples, the FAFSA continues to be required every year for each individual. As a married student, your parent’s financial information is no longer required on the FAFSA; however, a medical school may ask for this information to determine eligibility for other aid, such as institutional loans, grants or scholarships.
Other Repayment Tips and Strategies
- Aggressively repay the most expensive debt first - After making the required minimum payments on all loans, focus additional payments on high interest rate debt*.
- Unsubsidized loans are always accruing interest - Reduce the cost by paying some or all of the interest as it accumulates during school and residency.
- Develop a realistic budget - Manage your money during the lean years so that you can pay off your debt faster.
- Understand and protect your credit - Your credit score will determine your eligibility for loans and other products, as well as the interest rate you are offered for various loans. Therefore, it is important to maintain good credit and protect yourself from identity theft.
*Credit cards and private loans are generally the most expensive types of debt