I’ve never been convinced that IBR is actually worth it. I got a low income repayment plan and stretched 10 years worth of loans out over 27 years and boy did it suck to be making payments in between playing with my grandchildren. At the end I was making double and triple payments and I couldn’t wait to get the damn thing finished.
You are going to lose a ton of tax benefits by filing separately especially now that you have kids. You need to consider the cost of all of those benefits over the next 10, or 20, or 25 years to make sure that it is really worth it in the long term. In addition to the child tax credit and the FSA rules, your ability to contribute to an IRA is severely restricted, and a number of other credits and deductions are reduced or disallowed.
IBR might make sense if you will qualify for public service loan forgiveness after the first 10 years. But you should check the success rate of PSLF applications, a couple of years ago when the first loan started to mature, the success rate was less than 5%. People found that their jobs didn’t qualify, or that they hadn’t registered their income properly with the Department of Education, or that somewhere they had slipped up in the paperwork and their application was denied. I suppose IBR might also makes sense if you think that a Democratic-led federal government is someday going to forgive most of student loans. There are just enough moderate Democratic senators that I think that is unlikely to happen, at least for the near future.
Finally, unless the laws change, any forgiven student loan amount will be taxable income to you in the year it is forgiven. Once you consider the fact that the forgiven loan balance is taxable income, and add all the tax benefits you lost over the previous decades, you may not be as enamored of the plan as you are now.
