In a previous question, I asked if I was responsible for my wife's student loan.
The conclusion after reading the answer and checking with other sources is that I am not, in fact, responsible. However, my wife is, and because we file our taxes as "Married Filing Jointly" (there are a lot of weird discriminating things in the tax code that seem to penalize MFS and we can barely afford to file jointly much less MFS!) the IRS could withold our tax refund and apply it to the student loan. However, my witholdings are currently set up so that I will have no refund or perhaps owe a slight amount at the end of the year.
After several years of being in deferral it is no longer possible to continue deferring the loan, and payments are being required, the first one starting at the end of this month. Because we file jointly my income is also being considered with regards to how much she is being required to pay, and because of this she is not getting any break on the amount required.
We already have a budget set up which is intended to help pay down our existing debts (credit cards are maxed), and this has severely impacted things as we basically had to cut out about 25% of our spending. We are using two checking accounts, one for payments which are automatic and have to be paid, such as mortgage, insurance, car payments, utilities, etc. which I am responsible for and the remainder goes to my wife's account to pay for everything else which includes food, medical (co-pays, etc.), car and home maintenance and repairs, kid's expenses, etc.
However, my wife has decided that she is not willing to default on her student loan, which is nice, but... the only way she can make the payment (and this is with the graduated payment that starts out low now and more than doubles by the end of the 30 year term) is by spending 25% of her entire, already stretched budget for the month making this payment.
Is this responsible, or are there any arguments I can make that she should not do this? We have no emergency fund or savings, our credit card is maxed, and we are already having to defer maintenance items on our house. We are having looking at other options and trying to bring more income online such as part time / second jobs / getting her deadbeat ex to start paying support again (which wouldn't cover it but would help a little), but her options are reduced due to basically working full time at home (kids, homemaking etc.) and mine are limited by the fact that I'm basically already working full-time at a mentally demanding high paying job.
EDIT for specific numbers: Using round numbers. Student loan: $135,000, Household income=my income=$80,000/yr, Total Household debt (excluding student loan)=$210,000, 2 kids.