Understanding Partial Financial Hardship (PFH)

For the Income-Based Repayment (IBR) and Pay As You Earn (PAYE) plans, you are generally considered to have a "Partial Financial Hardship" if the annual payment amount calculated under your chosen IDR plan is LESS than what you would pay annually under a 10-year Standard Repayment Plan on your eligible federal student loans.

Meeting PFH criteria is a requirement to enter and remain in these specific IDR plans and make payments based on your income and family size. If you no longer have a PFH, your payment under IBR or PAYE might be capped at the 10-year Standard plan amount, but you could remain in the plan.

Key Considerations:

• Annual Recertification: You must recertify your income and family size annually to remain on an IDR plan. Your PFH status may change if your income or family size changes.
• Interest Capitalization: Unpaid interest may capitalize (be added to your principal balance) under certain conditions in IBR/PAYE if your income-based payment doesn't cover all accruing interest, particularly if you leave the plan or no longer have PFH in IBR.
• Loan Forgiveness: Remaining balances on IBR/PAYE are typically forgiven after 20 or 25 years of qualifying payments, though the forgiven amount may be taxable.
• SAVE Plan: The new Saving on a Valuable Education (SAVE) plan has replaced REPAYE and often offers the lowest monthly payments. It has different rules for calculating payments and interest benefits and does not use the same "PFH" threshold test for eligibility. You should also explore the SAVE plan on StudentAid.gov.