Assists borrowers who have low income but do not qualify for the Income-Based Repayment Plan (IBR) or the Pay As You Earn Repayment Plan (PAYE). The plan is designed to reduce monthly payments in order to make them more affordable.
The Income Contingent Repayment Plan structures loan payments based on the borrower’s adjusted gross income, family size, and the total amount of the borrower’s Direct Loans. Payments are set as the lesser of:
The amount the borrower would pay if the loan were repaid in 12 years multiplied by an income percentage factor that changes with annual income
20 percent of the borrower’s monthly discretionary income.
In addition to a more manageable monthly payment, the Income Contingent Repayment Plan also helps limit the interest paid on student loans through a Ten Percent Capitalization Benefit. If the calculated payment amount is less than the amount of interest that accrues on the loan, the interest is capitalized once each year until the balance is 10 percent higher than the original loan balance when the loan entered repayment. At this point, interest continues to accrue but is not capitalized (interest accrued during deferment or forbearance does not apply to the 10 percent capitalization rule).
ICR payments are structured for a term of 25 years. If a borrower on the ICR plan has made qualifying payments for 25 years, any loan amount that remains after 25 years of payments will be discharged (forgiven). Any balance forgiven after 25 years of repayment may be subject to federal and/or state income tax.
Direct Subsidized Stafford Loans (Direct Loan Program)
Direct Unsubsidized Stafford Loans (Direct Loan Program)
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans without underlying PLUS loans made to parents
FFEL Program Loans
PLUS loans made to parents, unless consolidated into a Direct Consolidation Loan on or after
July 1, 2006
Private education loans