Key Points
- The One Big Beautiful Bill Act removes the “partial financial hardship” rule for entering Income-Based Repayment (IBR).
- The change could open IBR to more borrowers, including some with higher incomes and certain Parent PLUS borrowers.
- Implementation is delayed until system updates are complete, expected winter 2025.
When Congress passed the One Big Beautiful Bill Act (OBBBA) this summer, one of its most anticipated provisions was the removal of the “partial financial hardship” requirement for federal student loan borrowers seeking to enter the Income-Based Repayment (IBR) Plan. The change, which expands eligibility for one of the most widely used income-driven repayment programs, was signed into law on July 4, 2025 - but it has yet to take actual effect.
According to new guidance released by the U.S. Department of Education on October 10, 2025, technical updates are still underway to adjust loan servicing systems. The department says those updates are expected to be completed “in winter 2025.” Until then, applications that would have been approved under the new rules will be held by loan servicers, to be processed once the systems are ready.
That means thousands of borrowers who might now qualify for IBR without demonstrating financial hardship (or who have certain 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 this article to you, so you can come back to it later!
What's Changing For Borrowers
Before OBBBA, borrowers could only enter the IBR Plan if they could prove a partial financial hardship - a technical term meaning their required payment under the standard 10-year repayment plan was higher than what they would pay under IBR.
OBBBA eliminates that restriction. Once implemented, borrowers will be able to choose IBR regardless of income level. This could be important for borrowers leaving the SAVE repayment plan but want to maintain PSLF eligibility.
The law also opens the door for certain Parent PLUS borrowers to access IBR for the first time - specifically, those who have consolidated their Parent PLUS loans into a Direct Consolidation Loan.
For most borrowers, payment calculations 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 then) pay 10% of discretionary income over 20 years.
And while the hardship requirement is going away, OBBBA does not alter one key protection: no borrower’s payment under IBR can ever exceed what they would pay under the standard 10-year repayment plan.
Why The Delay?
In its guidance, the Education Department emphasized that the delay is not a matter of policy disagreement but a technical one. Updating the federal loan servicing systems (managed by multiple contractors) requires reconfiguring how borrower eligibility and payment caps are calculated.
“We anticipate that the system changes will be completed in winter 2025,” the department said in an FAQ. Until then, applications from borrowers who would qualify only under the new rules “will be held” by servicers rather than denied outright. Once updates are complete, servicers will process those pending applications automatically.
That means borrowers don’t need to reapply once the systems are updated. However, those looking to consolidate Parent PLUS loans or make timing-based moves should act early, as the department is also phasing out several other income-driven repayment plans.
Deadlines And Options
OBBBA sets a series of deadlines for accessing repayment 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 like end in late 2027.
But starting July 1, 2026, those who take out new loans (or consolidate loans after that date) won’t be able to enroll in IBR, ICR, or PAYE. Instead, they'll only have the option for the new Standard Plan, or the new Repayment Assistance Plan (RAP). RAP will also be available for existing borrowers.
For Parent PLUS Loan borrowers, to avoid being shut out, the department “strongly encourages borrowers who must consolidate their loans in order to access the IBR plans to apply for their consolidation loan at least three months before July 1, 2026.” That means applying no later than early April 2026.
What Student Loan Borrowers Should Do Now
For now, borrowers who might benefit from IBR but lack a qualifying hardship have little choice but to wait for the Education Department to complete its updates. Loan servicers will hold eligible applications, so submitting one early could help borrowers get processed more quickly once the system goes live.
Those with Parent PLUS loans who intend to consolidate and move to IBR should begin the consolidation process soon, keeping the June 30, 2026, disbursement deadline in mind. Borrowers should also monitor official updates at Studentaid.gov, where the department says new guidance will be posted as changes roll out.
Don't Miss These Other Stories:
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.