You took out a lot of student loans, and your income is not quite to the point where you can reasonably keep up on all the loan payments. There is help. If you fit into the ‘partial financial hardship’ category, then you most likely can participate in either the Income Based Repayment (IBR) or The Pay As You Earn (PAYE) program. Meeting the partial financial hardship criteria can be pretty easy. You only need to show that your IBR or PAYE payment would be lower than the ten-year standard repayment plan.

What is a "partial financial hardship"?

A partial financial hardship is when the 10-year standard monthly payment on what you owed when you first entered repayment is more than 15% of discretionary income. See our other articles on how to figure out your discretionary income easy.

If the PAYE or IBR calculations show you would have much lower payments, you are allowed to sign up for one of these repayment plans. If you need to run the numbers according to your own financial situation, you can find resources here. The federal government also conveniently has loan calculators available for this.

If you have multiple loans, and know your monthly payments, use the loan calculator to see what total payment of your loans would be if you signed up for IBR or PAYE.

Here is a great example from the Department of Education Student Loan Assistance

Suppose your luck is terrible you have four federal student loans serviced by four different companies. Based upon the standard federal repayment plan, you have to make the following payments:

  • Company A: $200 per month
  • Company B: $100 per month
  • Company C: $50 per month
  • Company D: $50 per month

Based upon your monthly income and other bills you find it pretty easy to make the payments to Company C and D, but in total you are expected to pay $400 per month. That $400 in total is just too much to be paying.

You use the federal student loan calculator and find out that based your income and family size, your monthly payments can be $80 per month if you sign up for IBR.

Company A normally got $200 per month out of the $400 total that you paid.

Do the math : 200/400 = .5 Take the .5 that you just calculated and multiple it by your new IBR number, in this case it is $80… 80*.5 = $40 Thus you will owe $40 per month to Company A.

Doing the same calculations for the other companies we get $20 per month for Company B, and $10 per month for Company C And Company D.

Thus, your total payment for all four loan servicers is the $80 per month.

Many people worry that their payments with Company A and B would go down to $80 each, but that the payments with Company C and D would stay the same. It helps your payments a bit, but doesn’t make a huge difference.

The good news here is that the $80 that the government decides you can afford means $80 towards all of your federal student loans (Note: private loans are not a part of this process… they don’t even enter in the calculation for how much you can afford). That means that instead of paying $400 per month on your federal student loans, on IBR it gets reduced to $80 total.

How do I apply for IBR?

To apply for IBR, borrowers can log in at, enter their personal information into the Electronic IBR Application, authorize a transfer of their tax information using the IRS Data Retrieval Tool, and review, electronically sign and submit the completed form online.

You can use this site not only to apply for an IBR, but to keep your income information updated. This new tool has made it simple for borrowers to keep their loan payments manageable. You can electronically transfer your tax information, sign your agreement, and basically submit the whole package online.

If you are a borrower who may have federal loans from any lender, you will be able to find out who the servicer is in the National Student Loan Data System database. This database also lists the amount and status of all your federal student loans.

You can also apply for the IBR program for any older federal loans, regardless of when the loan was taken out. If the loans are in default, there will have to be steps taken to bring the loans out of default, and then you can try for the IBR program.