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Updated
Eligible loans | How much you pay | Repayment term | Who it’s best for |
---|---|---|---|
| Whichever is less:
| 25 years | Parent and student borrowers who want higher monthly income-driven repayments to save on interest. |
The ICR Plan comes with monthly repayments that are either 20% of your discretionary income or what you’d pay on a fixed 12-year plan — whichever is less. The Department of Education (DoE) forgives any remaining balance after 25 years.
This is generally the most expensive income-driven option available to Direct Loan borrowers. But the higher repayments can actually help you save in interest. It’s also the only option available to parent borrowers who want to apply for Public Service Loan Forgiveness (PSLF).
How much you pay on the ICR Plan depends on your monthly income and student loan balance. You might pay 20% of your discretionary income each month, though no more than what you’d pay for fixed repayments on a 12-year term.
The DoE calculates your discretionary income by multiplying the federal poverty guideline for your family size and state by 1.5. It then subtracts that from your annual income to get your discretionary income.
Next, it multiplies your discretionary income by 0.2 and then divides that number by 12 to get your monthly repayment amount.
How to calculate your monthly discretionary income
The easiest way to understand how repayments on the ICR Plan work is by looking at an example. Say you make $50,000 a year and have $100,000 in student loans at 5.3% APR.
Here’s what you might pay each month on the ICR Plan in most states by family size.
Family size | Poverty guideline | Discretionary income | Monthly repayment |
---|---|---|---|
1 | $12,490 | $31,265 | $521.08 |
2 | $16,910 | $24,635 | $410.58 |
3 | $21,330 | $18,005 | $300.08 |
4 | $25,750 | $11,375 | $189.58 |
No matter how much your salary increases, the maximum amount you’d pay per month is $940.01 — or how much you’d pay for fixed repayments over a 12-year term.
The only requirement to sign up for the ICR Plan is to have eligible loans, which includes most federal Direct Loans. The one exception is Parent PLUS Loans — you need to consolidate those with a Direct Consolidation Loan to qualify for the ICR Plan.
You can. The ICR Plan is one of the income-driven repayment plans that is eligible for PSLF. You can also qualify for federal Teacher Loan Forgiveness and other loan repayment assistance programs while paying off your loans with this plan. Even if you do nothing, the DoE forgives any remaining balance after 25 years of repayments.
Just keep in mind that the IRS considers most student loan forgiveness to be taxable income. This means you might end up in a higher tax bracket any year you get full or partial loan forgiveness.
The ICR Plan isn’t the right choice for everyone. Consider these potential perks and drawbacks before signing up.
You might want to consider the Income-Contingent Repayment Plan in the following situations:
Picking a repayment plan for the first time? Your servicer should send you an email with instructions on how to set up your account and choose a plan. Otherwise, the easiest way is to sign in to your Federal Student Aid (FSA) account and follow the directions to switch your repayment plan.
Signing up online only takes a few minutes if you use the IRS Data Retrieval tool. Otherwise, you might have to enter your tax information manually. It’s also possible to sign up by mail through your servicer.
How to apply for an income-driven repayment plan
Yes. Like other IDR plans, the ICR Plan requires borrowers to update their income and family size each year in order to remain eligible. You can also do this on the FSA website or by mail.
Not sure the Income-Contingent Repayment Plan is right for you? Consider one of these options instead:
The ICR Plan could be a good choice for parent borrowers who want to apply for forgiveness. It also has a lower cap on monthly repayments than other IDR plans, making it a more feasible choice if you’re in a lucrative career. But it can be expensive for low-income borrowers with a high amount of debt.
Find out how it stacks up to other options with our guide to student loan repayment plans.
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