An Income Contingent Repayment Plan (ICR) is a repayment plan that can help student loan borrowers get a more affordable monthly loan payment.
The monthly payment is calculated by taking the lower amount of two calculation methods:
- Based on income and student loan debt
- Based on income alone
The Income Contingent Repayment plan was created to help student loan borrowers achieve a student loan payment that they can actually afford. This repayment plan originated from the passing of the Health Care and Education Reconciliation Act of 2010.
As part of the act, the Department of Education now offers a variety of student loan repayment plans that assist student loan borrowers with their unique financial situation.
Student loan borrowers entering the Income Contingent Repayment plan will have access to the following benefits:
- A student loan payment that is based off of their income and the size of their student loan debt, or a payment that is based solely off income
- A monthly student loan payment that does not exceed 20 percent of your discretionary income
- This is the only income-driven repayment plan for Parent Plus Loan borrowers
What types of loans are eligible for the Income Contingent Repayment Plan
Any student loan borrower that has a Direct Loan can choose to repay their loans in the Income Contingent Repayment Plan. This plan is the only repayment plan that can help Parent Plus Loan borrowers lower their student loan payment. Parent Plus Loans can enter an ICR Plan once they go through the Direct Loan Consolidation process.
Loans eligible for the Income Contingent Repayment Plan are:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans that don’t include repaying Plus loans made to parents
- Subsidized Federal Stafford Loans made under the FFEL Program (*if they are consolidated)
- Unsubsidized Federal Stafford Loans made under the FFEL program (*if they are consolidated)
- FFEL PLUS Loans for graduate and professional students (*if they are consolidated)
- FFEL Consolidation Loans that didn’t repay any PLUS loans made to parents (*if they are consolidated)
- FFEL Consolidation Loans that repaid PLUS loans taken out by parents (*if they are consolidated)
- Federal Perkins Loans (*if they are consolidated)
- Direct PLUS Loans taken out by parents (*if they are consolidated)
Who is the income contingent repayment plan for?
A student loan borrower can benefit from the income based repayment if they meet the criteria below:
- Struggling to make their full student loan payment each month
- Anyone with a low income compared to their student loan debt
- Your current monthly student loan payment is more than 20% of your income
- Parents that have taken out Parent Plus Loans
Who is the ICR not for?
The Income Contingent Repayment Plan may sound like a great option for borrowers looking to lower their monthly student loan payment. Who wouldn’t want a lower student loan payment?
Here are some factors that can make you ineligible for an IBR Plan:
- Student loan borrowers that have a high income
- Anyone that can comfortably make their current Standard monthly payment
- Anyone that doesn’t want to make student loan payments for the next 25 years
- Student loan borrowers that are not considered to have a partial financial hardship
Am I eligible for the ICR Plan?
It’s important to remember that every loan borrower’s situation is different and the Income Contingent Repayment Plan might not be the best fit for some borrowers. The ICR plan doesn’t have initial eligibility requirement like other repayments plans.
Here are some basic requirements for an ICR Plan:
- Direct Loan borrowers
- After taking your information, your IBR Plan monthly payment must be less than the 10 -year Standard Repayment Plan monthly payment.
- You must be considered to have a partial financial hardship to be eligible for an income driven repayment plan
How long will I be in the ICR Plan?
The repayment period for the Income Contingent Repayment Plan is 25 years. After making 300 consecutive monthly payments, the remainder of your student loan balance will be forgiven.
Remember: If you’re expecting to get the remaining loan balance forgiven at the end of the repayment plan, you must make the consecutive payments every month during the repayment plan.
That’s right. You cannot miss a payment and the payments must be on time. You will need to make 240 – 300 payments to qualify for Student Loan Forgiveness at the end of your repayment program.
If you do enter an Income Contingent Repayment Plan and decide it’s not the right plan for you, you can choose to take yourself out of the plan. Once you take yourself out of the plan, you can place yourself into any repayment plan that you’re eligible for.
Is the payment the same each month?
The payment you start off with in an ICR plan will last 12 months or until it is time for you to apply for recertification. Income driven repayment plans require student loan borrowers to recertify their status in the program every year.
Recertification is an annual process of the income driven repayment plans that cannot be skipped. You must recertify each year to get back into the same ICR Plan. If you forget to do the recertification process, you get placed back into a Standard Repayment Program.
After you recertify each year, your monthly payment can change. Your payment can increase, decrease, or stay the same. It all depends on where you stand financially.
Your ICR monthly payment will be the lowest amount based off these two calculations:
- 20% of your discretionary income
- A fixed standard Repayment Plan that will enter you into a 12-year repayment period
Here are some factors that can change your monthly payment:
- You made more money on your most recent tax return
- You made less money/ lost your job
Which income driven repayment plan is the best for me?
While there are four income driven repayment plans, not all income driven plans are built for everyone. Depending on your unique financial situation, there might only be one repayment plan that makes sense for you.
Sometimes borrowers qualify for multiple income driven repayment plans and can’t decide which one makes the most sense.
Need help with that? Give us a call.
What factors come into play with the ICR
Your eligibility for the program is calculated based on the following factors:
- Your income – the amount of money you make determines whether the plan is a good fit for you
- Current Student Loan Payment – your newly calculated ICR Plan monthly payment needs to be lower than your current Standard payment or you’ll be placed in a 12-year Standard Repayment Plan
- Type of loans – the ICR Plan is available to borrowers with Direct Loans
What other options are there for me to repay my student loans?
The Department of Education offers a variety of student loan repayment programs to assist student loan borrowers with different financial situations.
There are four income driven repayment plans:
- Income Based Repayment Plan
- Income-Contingent Repayment Plan
- Pay As You Earn Repayment Plan
- Pay As Your Earn Revised Repayment Plan
There are four standard payment plans: