Key points
- The One Big Beautiful bill removes the partial financial hardship test from IBR eligibility, effective immediately.
- This opens up access to IBR for borrowers who were previously limited to less generous plans like ICR.
- However, implementation will not take place until December 2025 due to required system updates.
Education management And he confirmed Borrowers are no longer required to prove “partial financial hardship” to enroll in an income-based repayment (IBR) plan. This change, effective immediately under the One Big Beautiful Bill Act (OBBBA), allows more borrowers to switch to IBR and reduce their monthly payments compared to other repayment plans.
This is especially important now, as many borrowers previously enrolled in a SAVE plan are looking to change to IBR.
Until now, eligibility for IBR required borrowers to prove that their payment calculated under a standard 10-year plan would be higher than the payment calculated under IBR, a requirement known as the “partial financial hardship” requirement. This restriction has prevented many borrowers from entering the IBR program. These borrowers are often left with an income-based repayment (ICR) plan, which has higher repayment requirements and a longer path to forgiveness.
With the hardship test removed, more borrowers can now enter the IBR system, which requires monthly payments equal to 10% of discretionary income and offers loan forgiveness after 20 years. In contrast, ICR caps payments at 20% of discretionary income and is exempt after 25 years.
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@thecollegeinvestor Here’s the latest news on the partial removal of financial hardship requirements for IBR registration. December 2025 appears to be the new target. #Student loans #studentloandebt #Personal finance #Student Loan Forgiveness ♬ original sound – university investor
Why is this important for savings plan borrowers?
The timing of this policy shift is important for borrowers affected by a court order blocking a savings plan. Those currently enrolled in SAVE may be considering whether to change repayment plans, especially in light of interest resuming on August 1, but many have been unable to access IBR due to hardship requirements.
This is especially important for borrowers seeking Public Service Loan Forgiveness, who need to maintain an income-driven repayment plan to complete their qualifying payments.
Now, borrowers with federal loans issued on or after July 1, 2014, and before July 1, 2026, are eligible to join the IBR plan regardless of income. For those looking for an accessible path toward loan forgiveness, this provides an alternative to saving while maintaining access to lower ICR payments.
Yes, the payments are not as low as SAVE was supposed to be, but IBR is continuing to move forward along with the upcoming RAP. IBR is also eligible for Public Service Loan Forgiveness.
It is important to remember that OBBBA is also finalizing ICR and PAYE repayment plans, so allowing easier access to IBR is even more important.
Loan providers need time to implement change
Although the policy is already in effect, student loan servicers (such as MOHELA and Nelnet) are not yet able to process IBR applications under the new rule. the Latest update From the Ministry of Education that the system will be updated to process these requests in December 2025.
Moreover, Loan simulator on StudentAid.gov It also needs to be updated to reflect the changes.
Borrowers interested in converting to IBR who cannot due to the PFH rule can still apply, and loan officers will retain their applications. Providers will then process these requests after the system changes are completed.
In the meantime, borrowers should monitor communications from loan servicers and the Department of Education.
What will happen next?
Removing the partial hardship test was one of the lesser-known changes in the big beautiful bill. But it is one of the most important for borrowers trying to change repayment plans in light of the uncertainty over SAVE timelines and the future cancellation of ICR and PAYE.
Partial distress testing has created an administrative burden and prevented some borrowers from accessing more affordable options, even if their incomes are relatively low.
By eliminating this requirement, Congress and the Department of Education are streamlining the eligibility process for one of the most widely used IDR plans. Additionally, very soon it will be one of two options for existing borrowers (the other being a repayment assistance plan).
We hope that system updates will be completed soon so borrowers can sign up.
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Provide Student Loan Plan Timeline Estimates: What to Expect
Editor: Colin Greaves
The post IBR Eligibility Rules Changed to Remove Financial Hardship Requirement appeared first on The College Investor.
