What Does Income Contingent Repayment Mean

This type of repayment arrangement is mostly used for student loans where the ability of the new graduate borrower to repay is usually limited by his or her income.

What does income contingent repayment mean. Income contingent repayment icr is the oldest of the income driven repayment plans and it also may be the most expensive. It does this by pegging the monthly payments to the borrower s income family size and total amount borrowed. Income contingent repayment is an arrangement for the repayment of a loan where the regular e g. Income driven repayment plans base student loan payments on a percentage of the borrower s discretionary income as opposed to the amount owed.

Income driven repayment plans are intended to be a safety net in case the borrower graduates with too much student loan debt. The income contingent repayment icr plan is designed to make repaying education loans easier for students who intend to pursue jobs with lower salaries such as careers in public service.