Key points
- The One Big Beautiful Bill removes the “partial financial hardship” rule to introduce income-based repayment (IBR).
- This change could open up IBR to more borrowers, including some with higher incomes and some Parent PLUS borrowers.
- Implementation has been delayed until system upgrades are completed, expected in winter 2025.
When Congress passed the Big Beautiful Bill Act (OBBBA) this summer, one of its most anticipated provisions was to remove the “partial financial hardship” requirement for federal student loan borrowers seeking to join an income-based repayment (IBR) plan. The change, which expands eligibility for one of the most widely used income-based repayment programs, was signed into law on July 4, 2025 — but has not yet taken effect.
according to New guidance issued by the US Department of Education As of October 10, 2025, technical updates are still underway to fine-tune the loan servicing systems. The administration says these updates are expected to be completed “in the winter of 2025.” Until then, applications that would have been approved under the new rules will be held by loan providers, to be processed once the systems are ready.
This means that thousands of borrowers who may now qualify for IBR without showing financial hardship (or who have some consolidated Parent PLUS loans) are in a waiting period before they can take advantage of the change.
Would you like to save this?
We’ll email you this article, so you can come back to it later!
What changes for borrowers?
Before OBBBA, borrowers could only enter an IBR plan if they could prove a Partial financial distress –A technical term meaning that the payment required under the standard 10-year repayment plan was higher than what they would pay under an IBR.
OBBBA eliminates this restriction. Once implemented, borrowers will be able to opt for IBR regardless of income level. This may be important for borrowers who are leaving a SAVE repayment plan but want to maintain PSLF eligibility.
The law also opens the door for some Parent PLUS borrowers to access IBR for the first time — specifically, those who consolidated their Parent PLUS loans into a Direct Consolidation Loan.
For most borrowers, calculations payable under IBR remain unchanged:
- Those who borrowed before July 1, 2014, pay 15% of discretionary income with a 25-year repayment term.
- Those who borrowed on or after that date (or had no outstanding balance before that date) pay 10% of discretionary income over 20 years.
While the hardship requirement disappears, the OBBBA does change one key protection: any borrower’s payments under the IBR cannot exceed what they would pay under the standard 10-year repayment plan.
Why the delay?
The Ministry of Education stressed in its directives that the delay is not a matter of policy disagreement, but rather a technical matter. Modernizing federal loan servicing systems (managed by multiple contractors) requires reshaping how borrower eligibility and maximum payment are calculated.
He added: “We expect the system changes to be completed in the winter of 2025.” Said section in the instructions. Until then, applications from borrowers who would only be eligible under the new rules will be “held” by servicers rather than rejected outright. Once the updates are complete, providers will automatically process those pending requests.
This means borrowers do not need to reapply once systems are updated. However, those looking to consolidate Parent PLUS loans or make timing-based moves should act early, as the administration is also phasing out several other income-based repayment plans.
Deadlines and options
OBBBA sets a series of deadlines for accessing payment plans that are being restructured or phased out. Borrowers with existing federal loans made before July 1, 2026, will still be able to enroll in IBR forever. However, enrollment in Income Contingent Repayment (ICR) or Pay As You Earn (PAYE) will expire in late 2027.
But starting July 1, 2026, those who do will be evicted new Loans (or consolidated loans after that date) will not be able to register for IBR, ICR or PAYE. Instead, they will only have the option of the new Standard Plan, or the new Repayment Assistance Plan (RAP). The RAP will also be available to existing borrowers.
For Parent PLUS loan borrowers, to avoid being excluded, “the Department strongly encourages borrowers who must consolidate their loans in order to access IBR plans to apply for their consolidation loan at least three months before July 1, 2026.” This means applying no later than early April 2026.
What student loan borrowers should do now
Currently, borrowers who would benefit from IBR but lack qualifying hardship have no choice but to wait for the Department of Education to complete its updates. Loan servicers will keep eligible applications, so submitting an application early can help borrowers process applications more quickly once the system is up and running.
Those with Parent PLUS loans who intend to consolidate and move to IBR should begin the consolidation process soon, subject to the June 30, 2026 disbursement deadline. Borrowers should also monitor official updates on Studentaid.govThe administration says that new guidelines will be published as the changes begin to be implemented.
Don’t miss these other stories:
Appealing student loan forgiveness after court deal
PSLF Checklist: What Student Loan Borrowers Should Do
Parent plus borrower options for repayment and forgiveness
Editor: Colin Greaves
The post IBR rule change delayed due to technical issues appeared first on The College Investor.
