If you’ve applied for a payment plan for your student loans, you’ve probably come across the term “partial financial hardship.” “Financial hardship” can have a pretty broad definition, and the addition of “partial” makes it even harder to pin down. Simply put, it just means that your monthly loan payment—under the standard 10-year plan—would be unaffordable for you. For example, if you had $200k in federal loans and had borrowed them at 7% interest, your monthly payment would be about $2,322/month; you can see why that might be considered a hardship!
Federal Student Aid doesn’t want to make your loan repayment impossible, but they do want you to have some skin in the game: enter the Partial Financial Hardship. Income-Driven Repayment (IDR) Plans calculate your monthly student loan payments as a percentage of your discretionary income, which is the difference between your adjusted gross income (AGI) and 150% of the poverty line for your state and family size. For the PAYE plan, the Partial Financial Hardship is 10%. When you apply for PAYE, your payment must fall below the standard 10-year plan amount, or you won’t qualify. For example, using the same loan info as before:
If you’re a single person living in the contiguous 48 states and earning $100k/year, under the PAYE plan, you would pay $677/month. That’s less than the standard amount, therefore you qualify as having a Partial Financial Hardship. If you were earning $300k/year, however, under the PAYE plan, you would pay $2,344/month. That’s more than the standard amount, disqualifying you from having a Partial Financial Hardship, which would make you ineligible for an IDR plan. Fortunately, once you’ve qualified for an IDR Plan, you’ve got it for the life of your loan. If you had a Partial Financial Hardship when you applied, then your salary increased and you no longer have the PFH, you don’t have to worry about losing your plan. If your monthly payment under PAYE would ever exceed the amount you’d pay on the standard 10-year plan, it just gets capped at the standard plan amount.
Before recent changes to IBR, borrowers had to qualify for a Partial Financial Hardship just like PAYE. That’s no longer the case, however, and IBR is available to all borrowers, regardless of income. Depending on when their loans were issued, they’re eligible for payments at either 10 or 15% of their discretionary income per month. Unlike the new Repayment Assistance Plan, which will be available sometime in 2026, IBR caps your payment at the standard 10-year fixed plan amount (just like PAYE), which will be a big boon for some if they have to leave PAYE after it’s phased out sometime by mid-2028.
Confused? Don’t worry about it! Your student loan guides at Navigate are always just a phone call away and can help you determine if you have a Partial Financial Hardship, and will create a tailored repayment strategy just for you.
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