I am a medical student set to graduate in 2014 with substantial student debt, and I am recently married. I plan on using the pay-as-you-earn or income-based repayment option during residency and later pursuing academics, which would allow me to take advantage of federal loan forgiveness. I have two questions.

1. Given that this repayment plan uses your total income (which would include my wife's income if we filed jointly), is there a sense whether it is better to pay a higher monthly payment while taking advantage of filing jointly, or would filing separately and taking advantage of a lower monthly loan payment be wise? This would apply to next year's tax return (as I am not yet in residency).

2. For this year's return, does filing jointly this year preclude us from potentially filing separately next year?

Thank you for any thoughts on this topic.

Zip Code: 48105

Hi,

For the second question, filing jointly one year does not mandate that you need to file jointly the following year.

And for this loan repayment program, I would definitely check to see that filing separately does not cost you more taxes than you will save with a reduced loan payment. A tax accountant can help you figure this out, or you can probably run the numbers yourself on Turbo Tax. And please keep in mind that there are items such as Roth IRAs and deducting student loan interest that aren't allowed to married taxpayers filing a separate tax return.

I had another client ask me the same question recently, and she ended up deciding to file jointly. But the big difference for her was that she had a child, and filing separately eliminates the child tax credit of $1000 and the dependent care credit of $600 - among other tax breaks. So we determined she would be better off filing jointly and paying an extra $200 per month on her loans.

Zip Code: 01801