Partial Financial Hardship Removed from IBR in 2025

Updated on November 3, 2025

The partial financial hardship (PFH) requirement has been removed from all income-driven repayment (IDR) plans, effective July 4, 2025.

This change opens IBR and PAYE to borrowers with higher incomes—plans that previously screened out higher-income borrowers.

Plans like Income-Contingent Repayment (ICR) and SAVE never required a partial financial hardship, but they’re part of the same system updates now allowing IBR and PAYE borrowers to move forward again.

What Was Partial Financial Hardship?

Partial financial hardship was an eligibility test used in two IDR plans: IBR and PAYE.

You had a PFH if the annual amount due on your loans (and, if applicable, your spouse’s eligible loans) was greater than what you’d pay under IBR or PAYE.

You usually didn’t qualify for IBR or PAYE if your annual income was higher than your total loan balance.

This rule kept many mid- and high-income borrowers—from public service workers to physicians—from entering IBR even when they still needed an income-based payment plan.

When Was the Partial Financial Hardship Requirement Removed?

Congress officially removed the PFH requirement on July 4, 2025, through the One Big Beautiful Bill Act—a 2025 law that overhauled federal repayment programs.

The law directed the Education Department to remove the restriction immediately, but the Department lacked the infrastructure to implement it.

Screenshot from StudentAid.gov explaining new IBR changes under OBBBA, including removal of the partial financial hardship requirement in 2025.

The OBBBA update removes the “partial financial hardship” rule, expanding IBR eligibility for more borrowers in 2025.

That delay triggered a lawsuit by the American Federation of Teachers (AFT), which argued that the Department’s inaction violated the law.

In October 2025, AFT and the Education Department filed a joint status report—a court document outlining next steps.

Screenshot of a court document stating that borrowers will no longer be denied IBR eligibility due to lack of partial financial hardship starting July 2025.

In 2025, the Department of Education will remove the “partial financial hardship” requirement from the IBR plan.

That filing confirmed two key changes:

Applications won’t be denied. The Department agreed not to deny new IBR applications for lack of a partial financial hardship.
Applications will be held in “abeyance.” An “abeyance” is simply a temporary holding period—not denied, just paused. Borrowers who applied on or after July 4, 2025, and were denied because they lacked PFH are now invited to reapply. Their applications will be held until system updates allow proper processing.

The Department also committed to updating StudentAid.gov with clear instructions for affected borrowers.

What To Do Now

If your IBR or PAYE application was denied for not meeting the PFH requirement—or if you never applied because you assumed you’d be denied—you can reapply now.

Your application won’t be processed immediately, but it will be placed in abeyance and processed automatically once the Department’s systems are ready.

You’ll preserve your eligibility and forgiveness credit during this delay.

Continue making payments under your current plan if you can. If your payments are unaffordable, request forbearance from your servicer. This will keep your account current while your new plan is pending.

Once the system update is complete, the Department will process your application automatically.