College is over and now you are looking at a mass 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.

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) is the most widely available income-driven repayment (IDR) plan for federal student loans that has been available since 2009. Income-driven repayment plans can help borrowers keep their loan payments affordable with payment caps based on their income and family size. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.

Who can use IBR?

IBR is available to federal student loan borrowers with either Direct or FFEL loans, and covers most types of federal loans made to students, but not those made to parents (click here for more about qualifying loans). To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15% of whatever you earn above 150% of poverty level to pay off your loans on a standard 10-year payment plan. Please see the Department of Education's Repayment Estimator to see if you're likely to be eligible.

How does IBR make payments more affordable?

IBR uses a kind of sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more, your loan payment will be capped at 15% of whatever you earn above that amount.

150% of the Federal Poverty Level for 2015

Persons in Family or Household

48 Contiguous
States and D.C.



































For each additional person, add:




The chart below shows examples of IBR payment caps as a percentage of the borrower's total family income, based on various incomes and family sizes.

Payment Caps under IBR, as % of Total Family Income


Family Income (2015)





Number of
people in







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What about interest?

Every situation is different, so in some cases your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow even if affordable payments are low enough. The saving grace here is anything you still owe after 25 years of qualifying payments will be forgiven.

What are qualifying payments?

The Department of Education has indicated that the following types of payments will count towards IBR's 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

  • Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
  • All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
  • Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
  • Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment

If enrolled in the ICR program, it is vital to stay up on recertifications for continuation in the program. By not doing so, this could end up costing you thousands of dollars and a whole lot of headaches.