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It’s easy to feel like you can’t afford your student loan payments. The federal government determines whether that’s the case by seeing if you have what’s known as a partial financial hardship.
Demonstrating a partial financial hardship is required to enroll in the Income-Based Repayment (IBR) or Pay As You Earn (PAYE) income-driven repayment plans. Use this calculator to estimate if you meet this requirement for either plan.
Partial financial hardship calculator
What is a partial financial hardship?
Having a partial financial hardship means that your student loan bills are too high for your income, relatively speaking. In practical terms, it means you would pay less each month in an income-driven repayment plan than the standard repayment plan.
To determine if you have a partial financial hardship, your servicer will calculate your monthly payment under the standard plan as well as IBR and PAYE and then compare them.
If you’d pay more under the standard plan, you have a partial financial hardship and would qualify for IBR and/or PAYE, provided you meet the specific plan’s other eligibility criteria.
Payments under all income-driven plans are generally a percentage of your discretionary income.
For IBR and PAYE plans, the federal government calculates your discretionary income as the difference between your adjusted gross income (AGI) and 150% of the poverty line for your family size and state.
When determining whether you have a partial financial hardship, your servicer will use the following percentages:
10% of your discretionary income for PAYE.
15% of your discretionary income for IBR.
Your payments under IBR would be 10% of your discretionary income if you were a new borrower as of July 1, 2014. However, 15% is the threshold for all borrowers when calculating partial financial hardship for IBR.
Do you always need a partial financial hardship?
Some income-driven repayment plans don’t require a partial financial hardship to enroll. Most notable is Saving on a Valuable Education, or SAVE, which also limits payments to 10% of your discretionary income. That rate will drop to 5% for undergraduate borrowers starting summer 2024.
But if you opt for IBR or PAYE, you must continue displaying a partial financial hardship when you recertify your income and family size every year. If you lose this designation, your payments will stop being based on your income and unpaid interest will be capitalized, or added to your balance, increasing the amount you owe.
To avoid these additional costs, think about long-term fit when deciding which income-driven plan is right for you. In general, IBR and PAYE are best for borrowers who don’t expect their income to rise much in the future, as well as those with grad school debt. SAVE is better for borrowers with higher earning potential who don’t qualify for PAYE.
Other student loan calculators
Discretionary income calculator: Determine what you would pay under federal income-driven repayment plans.
Student loan refinance calculator: Compare your current loan payment or multiple payments with a refinanced student loan.
Student loan consolidation calculator: Compare your payments under federal loan consolidation plans with your current bills.
Parent PLUS loans calculator: Estimate your monthly payments on federal direct PLUS loans.
Daily student loan interest calculator: Estimate the amount of interest that your loan accrues daily and between payment periods.
Weighted average interest rate calculator: Determine what the average rate on your current loans is.
Student loan calculator: Determine the monthly payment on new student loans you take out, federal or private.
