Higher-Income Borrowers Now Qualify for Lower Payments and Long-Term Relief — Here’s What Just Changed

Introduction

A major shift in federal student loan repayment quietly took effect right before the holidays and it’s opening doors for millions of borrowers who were previously shut out of affordable payment options.

On December 22, the Department of Education announced that it had officially completed a long-awaited update to Income-Based Repayment (IBR). This change removes one of the biggest barriers to accessing the plan: the requirement to show partial financial hardship.

With that restriction gone, higher-income borrowers and borrowers with smaller balances can finally qualify for payment reductions and long-term student loan forgiveness under IBR.

Here’s what changed, why it matters, and how borrowers can take advantage of it.

The Financial Hardship Rule Is Gone And That Opens the Door for More Borrowers

Previously, borrowers could only enroll in IBR if their required payment amount was less than what they would owe under the standard 10-year repayment plan. This rule blocked many higher-income earners from accessing IBR altogether, even if they were seeking a pathway to forgiveness.

President Trump’s “big beautiful” spending package included language to eliminate this requirement but the system update needed to implement it took months.

Now the update is complete, and the Department of Education says borrowers who were rejected earlier in the year should reapply immediately.

According to the Department:

• Servicers will process previously held IBR applications in the order they were received.

• Anyone denied because they “did not show financial hardship” can now qualify under the new rules.

• Borrowers can apply through the standard online IDR application portal.

How Updated IBR Payments Work

IBR remains one of the most stable income-driven repayment plans and with SAVE shut down and other IDR plans being phased out by 2028, millions of borrowers will eventually rely on it.

Here’s how the updated IBR plan works:

For loans taken out before July 1, 2014

• Payments = 15% of discretionary income

• Forgiveness after 25 years

For loans taken out after July 1, 2014

• Payments = 10% of discretionary income

• Forgiveness after 20 years

These timelines are important for borrowers working toward IDR forgiveness and those aligning repayment with career plans, family planning, or long-term financial goals.

IBR Forgiveness Processing Has Restarted

After months of delays due to system errors and litigation, the Education Department has resumed granting forgiveness for borrowers who hit their 20- or 25-year thresholds under IBR.

This fall marked the first round of processed approvals after the backlog a relief for borrowers who waited years for their accounts to be reviewed.

With the new hardship rule eliminated, more borrowers should now be able to stay enrolled in IBR long enough to reach forgiveness without being forced into unaffordable plans.

More Changes Are Coming in 2026

The update to IBR is only one piece of a larger restructuring underway for federal repayment programs.

By July 2026, the Department of Education plans to roll out:

New borrowing caps

Graduate and professional students may soon face limits on how much federal loan funding they can take out.

The Repayment Assistance Plan (RAP)

RAP is expected to replace several existing income-driven repayment plans as part of the federal overhaul. While the details are still evolving, many advocates warn that RAP could leave some borrowers with higher payments than they’d experience under traditional IDR options.

As these changes approach, IBR is becoming the most predictable and secure repayment pathway still available.

The Bottom Line

The removal of the financial hardship requirement marks one of the most borrower-friendly updates in an otherwise turbulent repayment era. With more people now eligible for IBR including higher-income borrowers who were previously excluded millions can lock in lower payments and maintain access to long-term forgiveness. Staying informed and proactive will ensure borrowers are prepared as additional federal changes roll out through 2026.