DFA reader Carrie asked
I believe I am eligible for loan forgiveness… but what do I do about monthly payments? The “consultant” at Direct Loans told me that if we file separately on our taxes, my payments will be under $300 per month – otherwise, they could be much more. What are the costs and benefits of filing separately versus jointly? Anything we can do in 2011 to make one or the other more beneficial?
I am married, and my husband and I are 30 years old. We have a two year-old son and just bought our first home in April, 2009. Fair credit scores (in the mid-600’s). I have deferred student loan payments since graduating (in 2007) with my doctorate – an academic adventure that allowed me to rack up about $95,000 in student loans. Payments are coming due – for real – in March, 2011. I landed a job this year teaching at a local community college (public), plus I teach some adjunct classes on-line. I make about $45,000-50,000 a year, and my husband makes around $40,000. He has no student loan debt.
Hi Carrie, God bless you and your family. I understand your burden of student loan and mortgage debt, and my heart goes out to you because of it. Hang in there, focus on living a mission-centered life, and God will be with you.
Can you afford the monthly payments? Other than your student loan and mortgage debt, what other debt do you have? If you are making a combined $85,000 we should be able to help you figure a way to afford the $300 student loan payment.
Do you have credit cards? Cancel them and pay them off before your deferment ends.
Do you pay for cable or satellite TV? Cancel it.
Do you operate your finances using a budget? If not, then download this budget spreadsheet and get started.
Read this post on additional ways to save money fast.
If you use these strategies you can save money and make your payments.
As for how you should file? That depends on the full details of your situation. After searching around a bit, I was able to find 3 articles that should help you figure out your answer. In reading them, you may lean toward filing jointly if your son frequently attended day care, if you file separately you lose eligibility. You also lose the ability to claim student loan interest if you file separately, but it looks like you may not have paid any yet, since your loans are deferred.
Here are three links I found giving some pros and cons of married filing separately. Please read them and feel free to ask more questions in the comments section of this post. I will do my best to help answer, and so will the DFA Missionaries and community. Also, your situation will help others who are searching for similar answers way into the future, so thank you for your question.
- Married Filing Separately
- Pros And Cons Of Married Filing Separately
- When sharing taxes might not be a good idea
If you can offer more advice to Carrie, please leave a comment. God bless.