Income-Contingent Repayment (ICR) Student Loan Repayment Plan
There is a ton of focus on getting into and paying for college. However, after those four (hopefully!) years, young adults must often face the task of not only finding employment but also repaying college student loans. There are many different ways to tackle student loan repayment. Let’s take a look at one option available: Income-Contingent Repayment (ICR) Student Loan Plan.
Income-Contingent Repayment (ICR) Plan
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What are Income-Contingent Repayment (ICR) Plans?
The Income-Contingent Repayment (ICR) plan is a federal student loan repayment plan that is designed to make student loan payments more manageable by adjusting the payment amount based on the borrower's income and family size. It was introduced in 1993 and is available for borrowers with Direct Loans.
Details of Income-Contingent Repayment (ICR) Plan
Under the ICR plan, borrowers make monthly payments that are calculated as a percentage of their discretionary income, which is the difference between their adjusted gross income and 100% of the federal poverty line for their family size and state of residence. The payment amount is adjusted annually based on changes in income and family size, and any outstanding balance on the loan after 25 years of qualifying payments will be forgiven.
One unique feature of the ICR plan is that it takes into account a borrower's spouse's income when calculating the payment amount, even if the spouse does not have any student loans. This can be advantageous for borrowers who have a low income but a spouse who earns a higher income.
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How to Qualify for Income-Contingent Repayment (ICR) Plan
To be eligible for the ICR plan, borrowers must have a Direct Loan that is not in default, and they must demonstrate partial financial hardship to qualify. The ICR plan is not available for borrowers with FFEL loans.
Overall, the ICR plan can be a good option for borrowers who have a low income and a high debt-to-income ratio. However, borrowers should carefully consider the potential tax implications of loan forgiveness after 25 years and compare the ICR plan with other repayment options before deciding on a plan.
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There is a lot to be gained from our free general financial aid advice, but it’s also a very individual process. If you have remaining financial aid questions, email us to discuss more or book an individual session.