What Is Income Contingent Repayment

Income contingent repayment icr is the oldest of the income driven repayment plans and it also may be the most expensive.

What is income contingent repayment. Income contingent repayment plan icr under the icr plan your payment is the lesser of. Borrowers who qualify for the 20 option can make payments under icr for up to 25 years. 20 of your discretionary income or. 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.

As mentioned above income contingent repayment icr is one of the four income driven repayment plans offered by the government. The interest rate for the income contingent repayment plan is fixed for the life of your loan. Income contingent repayment icr an icr plan allows you to pay the lesser between either 20 of your discretionary income or what you would pay with a fixed plan over 12 years. It does this by pegging the monthly payments to the borrower s income family size and total amount borrowed.

You must consolidate your loans with a direct consolidation loan before you can take advantage of icr. Income contingent repayment is an arrangement for the repayment of a loan where the regular e g. Here s what you need to know. Though it doesn t always result in the lowest monthly payment for borrowers it is the best choice if you re looking for a way to pay the least amount over the long term when refinancing your student loans.

If you first consolidate your loans your interest rate through icr is the weighted average of the interest rates on the loans included rounded up to the nearest one eighth of 1. You don t need to demonstrate financial need to get on icr. Still if you have a parent plus loan income contingent repayment is. Income contingent repayment has a few important differences from income based repayment.

There s no income requirement to get on the plan but you will need to verify your income and family size annually to. The conditions for the income contingent repayment icr program are less strict than many other income driven repayment plans enabling borrowers with federal student loans not accepted by other plans to seek approval. The icr program is the only income driven plan currently available for parent plus loan borrowers. No financial hardship requirement.

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.