The income contingent repayment costs more per month than other income-driven repayment plans. ICR payment cap is 20% of your discretionary income and lasts up to 25 years. Yet, this plan may be your best income-driven choice in the following cases:
- You desire a little lower payment to potentially pay smaller interest.
- You have a parent PLUS loans or a consolidation loan that comes with parent PLUS loans.
Being one of the older most student loan repayment programs available, the Income-contingent Repayment (ICR) Plan uses your income to determine how much you can afford to pay towards your student loans every month. The ICR program is designed to help borrowers who don’t qualify for other loan repayment plans take advantage of lower payments and potentially earn loan forgiveness.
Other income-driven options
If ICR for parent PLUS loans doesn’t sound right for you, consider one of the other 3 income-driven repayment plans.
Revised Pay As You Earn (REPAYE): ideal for single borrowers, those without grad debt and those with higher earning potential.
Pay As You Earn (PAYE): perfect for family borrowers (those married) with two incomes, those with grad school debt and those with lower earning potential.
Income-Based Repayment (IBR): good for borrowers who don’t qualify for PAYE or have FFELP loans.
ICR vs. other Income-Driven Plans
ICR at a glance
- Repayment length: 25 years.
- Payment amounts: 20% of your discretionary income or fixed payments based on a 12-year loan term, whichever is lower.
- Other qualifications: Should have federal direct loans.
- Best for: Parent borrowers; slightly lower payments.
In reality, all income-driven plan share some features: Each caps payments to between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments. Use Federal Student Aid’s Repayment Estimator to see how much you might pay under different plans.
In majority of cases, the easiest way of picking an income-driven plan is to allow your servicer place you on the plan you qualify for that has the smallest monthly payment. But majorly selecting Income Contingent repayment fedloan may be the best thing for you in the following situations:
- You have parent PLUS loans
This is otherwise known as – Income Contingent repayment for parent plus loans.
The ICR is the only income=driven plan open to every federal direct loan borrowers- including those with consolidation loans that include parent PLUS loans or those with Parent PLUS loans.
To meet the requirement of Income contingent repayment parent PLUS, parent PLUS borrowers must first consolidate their student loans, if they haven’t already. You can do this for free at studentloans.gov.
- You want slightly lower payments
Payments on income-contingent repayment can be a nice balance between standard repayment and other income-driven plans. Your bills won’t be so freaking high that you can’t afford them — as they could be on the standard plan — and won’t be too low that interest piles up.
Because payments on ICR are bigger than other income-driven plans, you’ll face mire of the interest as it accumulates. You’ll also reduce any future costs should you get Income Contingent repayment forgiveness, as the forgiven amount would be taxable.
If minimizing interest increase is your aim, consider REPAYE instead. REPAYE offers subsidies on unpaid interest that ICR doesn’t, and you can always pay extra each month to make a greater dent in what you owe. But if you don’t think you’ll stick with making those extra payments, ICR may make more sense for you.
How to Qualify for the ICR Plan
So, now you’re ready to apply for ICR program, the conditions are less strict when compared to majority of other income-driven repayment plans, allowing borrowers with federal student loans not accepted by other plans to seek approval.
The ICR program is the only income-driven plan presently available for parent PLUS loan borroers.
Loans eligible for the ICR program are:
- Direct Subsidized & Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Consolidated Subsidized & Unsubsidized Federal Stafford Loans from the FFEL program
- Consolidated FFEL PLUS Loans made to your parents and graduates or professional students
- Consolidated FFEL Consolidation Loans not used to repay any PLUS loans made to your parents
- Consolidated FFEL Consolidation Loans used to repay PLUS Loans made to your parents
- Consolidated Federal Perkins Loans
- Consolidated Direct PLUS Loans made to your parents
- Direct Consolidation Loans not used to repay any PLUS Loans made to your parents
- Direct Consolidation Loans used to repay PLUS Loans made to your parents
You’d be happy to no that there are no income requirements asked when filling the Income contingent repayment form and it may be great option for borrowers who pursue careers with less income like teaching, public service or other rewarding professions.
Find out if you can take advantage of the ICR Plan for free.
ICR Application and How to Apply
You need to enroll in Income-Contingent Repayment. You can simply do this by mailing a completed income-driven repayment request to your student loan servicer, but it’s more hassle-free to complete the process online. You can change your student loan repayment plan at any time.
- Open your browser on your desktop, laptop or mobile device.
- Then input studentloans.gov on the address bar. Log in with your Federal Student Aid ID, or create an FSA ID if you don’t have one.
- Pick income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return.
- Select your plan. If you qualify for more than one income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose ICR if it makes the most sense for you.
- Complete the application. Enter the details asked about your family and income. Ensure you include your spouse’s information, if applicable, as it will affect your payments under ICR.
How the ICR Plan Works
The ICR (Income-contingent repayment Plan) seeks to reduce your monthly student loan payments by basing payments on your discretionary income. Depending on your family size and income, you might even qualify for no monthly payments under the ICR plan.
Monthly Payments Under the ICR Plan
Once you apply for the ICR program, you’ll be asked to input details about your expenses, income, and family size. Using this information, the Department of Education will pick the best option for repaying your loans at the lowest monthly payment available.
Your monthly payment on the IC R Program will be one of these 2 options determine by the DOE:
- 20% of your discretionary income
- What you’d pay on a 12-year fixed repayment plan when adjusted for your income
Recertifying Under the ICR Plan
You’ll need recertify your family size and income per year to stay qualified for the ICR plan, even if there are no new changes from the past year. But, as your family size of income changes, the amount you settle per month could go down or up based on these factors.
Your loan servicer will send a reminder when it’s time to recertify for the ICR program. You can also have your payments adjusted at any period or time by submitting your recertification before time. This is a great idea if your family size or income changes significantly before the recertification deadline.
If you fail to recertify before the deadline, your monthly payments will be based on the amount you initially owed under the 10-year Standard Repayment Plan. By providing your servicer with updated information, you can start making payments again based on your discretionary income.
Length of Repayment Period Under the ICR Plan
The repayment period for the ICR program is just 25 years.
That’s more than enough, right?
Any loan balances that are left after the 25-year period are eligible for forgiveness.
Whether or not your total balance is paid within the 25-year period depends on how your income, family size, and expenses change over the period of the program. Your loan servicer will monitor your progress while you’re on the plan and will alert you when you’re close to qualifying for forgiveness.
In this 25-year repayment timeframe, your ICR program loans will stay eligible for forgiveness during economic hardship deferment, repayment of other types of repayment plans and any time you’re not required to make a payment due to your discretionary income.
If you’re also working towards loan forgiveness as part of the Public Service Loan Forgiveness (PSLF) Program, you might have your loans forgiven (if you’re eligible) as part of its 10-year repayment period.
For more details on the ICR program, speak with an ICR specialist by phone at CALL US NOW.