The development stemmed from a federal court injunction blocking former President Joe Biden’s Saving on a Valuable Education (SAVE) plan. This was designed to offer borrowers lower monthly payments and quicker loan pardons.
As a result, the media reports stated, the Department of Education is reverting to earlier regulations. They cited the Eighth Circuit Court of Appeals’ order as the basis for the change.
Spousal income is now part of the equation
As per a Business Insider report, currently the married borrowers who file taxes separately can have their IDR payments calculated solely based on their own income. Reportedly, this option helps avoid higher monthly obligations resulting from combined household income.
However, Acting Under-Secretary James Bergeron, reportedly, said in a legal declaration that this flexibility would no longer apply. Bergeron said that under the revised plans, married borrowers filing separate income tax returns or those separated from their spouses will have spousal income counted when their payment amounts are being determined. This, as per the BI report, will potentially lead to a significant increase in monthly dues for many households.
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Legal battle over borrower protections
The American Federation of Teachers (AFT) sued in March after the Education Department briefly took IDR applications offline, the reports added. While applications have been reactivated, they are still not being processed.
Meanwhile, as per reports, a hearing in the main court on the AFT’s motion for a temporary restraining order is scheduled for April 17.
The AFT contended that the department’s actions are against the law and contrary to federal law. Particularly, US Code § 1098e requires borrowers who file taxes individually to have payments determined strictly according to their own income and student debt.
Experts in education law referred to the use of the term ‘shall’ under the statute. This makes the calculation method a congressional mandate rather than a matter of discretion.
Ambiguous rules, increasing pressure
Reportedly, critics, such as financial planners and borrower activists, cautioned that the shift could economically ruin borrowers who already sacrificed tax disadvantages by filing separately to reduce their loan installments. This sudden turnabout could create double financial costs—higher taxes and higher loan installments.
Although the Department has pledged to restart IDR application processing by May 10, how this transition will reconcile with current laws is not certain, the reports added.
FAQs
Q: Why might married student loan borrowers pay more from May 2025?
A: Due to a court ruling blocking the SAVE plan, the US Department of Education plans to include spousal income in monthly payment calculations for income-driven repayment plans, even for borrowers who file taxes separately.
Q: Is this change in line with federal law?
A: Legal experts argue it may contradict U.S. Code § 1098e, which mandates that only the borrower’s income be used if they file taxes separately. This potential conflict could lead to further legal action.
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