Key Points
- The One Big Beautiful Bill removes the partial financial hardship test from IBR eligibility, effective immediately.
- This opens access to IBR for borrowers who were previously limited to less generous plans like ICR.
- However, implementation will not happen until December 2025 due to system updates required.
The Department of Education has confirmed that borrowers are no longer required to demonstrate a “partial financial hardship” to enroll in the Income-Based Repayment (IBR) plan. This change, effective immediately under the One Big Beautiful Bill Act (OBBBA), allows more borrowers to switch into IBR and reduce their monthly payments compared to other repayment plans.
This is especially important now, as many borrowers previously enrolled in the SAVE plan are looking to change to IBR.
Until now, eligibility for IBR required borrowers to prove that their calculated payment under a 10-year standard plan would be higher than the payment calculated under IBR, a condition known as the "partial financial hardship" requirement. That restriction blocked many borrowers from entering the IBR program. Those borrowers were often left with the Income-Contingent Repayment (ICR) plan, which has higher payment requirements and a longer path to forgiveness.
With the hardship test removed, more borrowers can now enter IBR, which requires monthly payments equal to 10% of discretionary income and offers loan cancellation after 20 years. ICR, by contrast, sets payments at 20% of discretionary income and forgiveness after 25 years.
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@thecollegeinvestor Here’s the latest on the removal of the partial financial hardship requirement to enroll in IBR. It appears that December 2025 is the new goal. #studentloans #studentloandebt #personalfinance #studentloanforgiveness ♬ original sound - The College Investor
Why This Matters For SAVE Plan Borrowers
The timing of this policy shift is significant for borrowers affected by the court injunction blocking the SAVE plan. Those currently enrolled in SAVE may be weighing whether to switch repayment plans, especially in light of interest resuming on August 1, but many were unable to access IBR due to the hardship requirement.
This is especially important for borrowers pursuing 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 seeking an available path toward loan forgiveness, this offers an alternative to SAVE while preserving access to lower payments than ICR.
Yes, the payments are not as low as SAVE would have been, but IBR is continuing forward along with the upcoming RAP plan. IBR is Public Service Loan Forgiveness eligible as well.
It's important to remember that the OBBBA is also ending the ICR and PAYE repayment plans, so allowing easier access to IBR is even more important.
Loan Servicers Need Time To Implement The 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 Department of Education is that the system will be updated to process these applications in December 2025.
Furthermore, the Loan Simulator on StudentAid.gov also needs to be updated to reflect the changes.
Borrowers who are interested in switching to IBR and cannot due to the PFH rule can still apply, and loan servicers will hold their applications. Servicers will then process those applications after the system changes are completed.
In the meantime, borrowers should monitor communications from their loan servicers and the Department of Education.
What Happens Next?
The removal of the partial financial hardship test has been one of the less publicized changes in the One Big Beautiful Bill. But it’s one of the most consequential for borrowers trying to change repayment plans in light of the uncertainty around SAVE timelines and the future elimination of ICR and PAYE.
The partial financial hardship test created an administrative burden and blocked some borrowers from accessing more affordable options, even if their incomes were relatively low.
By eliminating this requirement, Congress and the Department of Education are simplifying the eligibility process for one of the most commonly used IDR plans. Plus, pretty soon it will be one of two options for existing borrowers (the other being the Repayment Assistance Plan).
Hopefully the system updates are completed shortly so that borrowers can opt in.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.