The U.S. Department of Education offers several options for student loan borrowers who aren’t able to afford the standard repayment plan. Income-contingent repayment is one type of repayment plan that lowers your monthly payment based on your income and family size, and it’s the only available income-driven repayment plan for parent PLUS borrowers.
Income-contingent repayment can make repayment more manageable for many borrowers, but it’s not the right choice for everyone. Here’s what to know about the plan and whether it’s best for your student loans.
What is income-contingent repayment?
Income-contingent repayment is one of five income-driven repayment plans you can apply for to lower your federal student loan payments. The plan considers your income and your family size and adjusts your monthly payments accordingly.
- 20 percent of your discretionary income.
- The amount you would pay on a fixed repayment plan for 12 years, adjusted based on your income.
The payment term under the ICR Plan is 25 years. If you have any remaining balance after that time, it will be forgiven.
You can qualify for the ICR Plan if you have any of the following types of eligible federal student loans.
- Direct Unsubsidized and Subsidized Loans.
- Direct Consolidation Loans.
- Direct PLUS Loans (taken out by graduate or professional students).
You might also be able to participate in an ICR Plan if you consolidate noneligible loans – including parent PLUS loans, FFEL Program Loans and Perkins Loans – into a Direct Loan first. However, if you have private student loans or federal student loans in default status, you won’t qualify.
It’s worth noting that income-contingent repayment is the only relief plan available to borrowers with parent PLUS loans (after eligible student loan consolidation). The other income-driven repayment plans do not accept Direct Consolidation Loans that repaid parent PLUS loans.
How to calculate income-contingent repayment monthly payments
If your income or family size changes, your payment can change as well; you’ll have to recertify your income every year you’re on the plan. Læs mere Who qualifies for the income-contingent repayment plan?