Key Takeaways:
- The U.S. Department of Education is removing the “partial financial hardship” requirement for the Income-Based Repayment (IBR) plan.
- This change, expected to be fully implemented in December, will make the IBR plan accessible to most federal student loan borrowers, including those with higher incomes.
- The update comes as other plans like SAVE, ICR, and PAYE are being phased out, making IBR a crucial option for affordable payments.
- A new “Repayment Assistance Plan” (RAP) is also on the horizon, offering another path to lower payments, though with a longer forgiveness timeline.
Many federal student loan borrowers could soon see their monthly payments decrease as the U.S. Department of Education finalizes significant changes to one of its key repayment plans. The update targets the Income-Based Repayment (IBR) plan, making it accessible to a much wider audience.
IBR Plan Opens to More Borrowers
Previously, enrolling in the IBR plan required borrowers to demonstrate a “partial financial hardship.” However, this requirement is being waived, and the change is expected to be widely available by December, according to the Department of Education.
“In the meantime, servicers will hold IBR applications that would otherwise be denied,” the department’s guidance states.
This policy shift means that higher-earning individuals and most other federal student loan borrowers will now be able to qualify for the IBR plan. Under IBR, monthly payments are capped at 10% of a borrower’s discretionary income (or 15% for those with older loans). Any remaining debt is forgiven after 20 or 25 years of payments, depending on when the loans were first taken out.
A Shifting Repayment Landscape
The easier access to IBR comes as other affordable repayment options are being phased out. The Biden administration’s SAVE plan was overturned, while the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans are scheduled to be discontinued as of July 1, 2028.
According to higher education expert Mark Kantrowitz, many of the 2.5 million borrowers currently enrolled in ICR or PAYE may find lower monthly payments under the newly accessible IBR plan. However, monthly bills under IBR will likely be higher than they were under the former SAVE plan.
New “Repayment Assistance Plan” (RAP) Coming Soon
Starting July 1, 2026, borrowers will have another option: the Repayment Assistance Plan (RAP). While this plan may offer the lowest monthly payment for some, it comes with a catch—a longer, 30-year timeline for loan forgiveness compared to the 20-25 years typical of other plans.
What Borrowers Should Do Now
As these changes roll out, borrowers should explore their options. Fortunately, switching between repayment plans will not reset your progress toward loan forgiveness.
“The good news is that all of these plans cross-pollinate, so whatever ‘count’ they have on ICR or PAYE will also count towards whatever plan they switch to,” said Betsy Mayotte, president of The Institute of Student Loan Advisors.
Borrowers can use online tools, including the loan simulator on the official StudentAid.gov website, to compare their potential monthly payments under the different plans and determine the best financial path forward.
Image Referance: https://www.cnbc.com/2025/12/01/student-loan-ibr-change.html
