After College: Income-Contingent Repayment May Meet Your Federal Student Loan Repayment Needs

In mid-October we reviewed Income-Based Repayment (IBR), a popular income-driven approach to repaying Federal Direct Loan Program (FDLP) debt. Today we’ll look at another FDLP repayment option that’s tied to what you earn — Income-Contingent Repayment (ICR).

Like all repayment plans, ICR has certain pros and cons:

  • Pros: ICR can provide you with a way to make your monthly FDLP payments more affordable, especially if what you would otherwise be required to pay eats up a big chunk of your monthly income. It does this by giving you up to 25 years to pay off your FDLP debt, and it will forgive any of that debt you may still owe after 25 years of payments.
  • Cons: By spreading your repayment out to as many as 25 years, ICR can keep your FDLP debt out there for a much longer period than it would otherwise be under one of the FDLP’s conventional repayment plans. It will also result in you spending more of your lifetime earnings on FDLP Loan repayment.

ICR can be used to repay any FDLP Loans you borrowed while you were a student — Graduate PLUS Loans, Subsidized Loans, and Unsubsidized Loans. All other types of federal student loans, including but not limited to Parent PLUS Loans, must be repaid and replaced by an FDLP Consolidation Loan to be included in an ICR Repayment Plan.

The legal and regulatory requirements for determining your exact monthly payment amount under ICR are exceedingly complex so, rather than going into the details of all that federal gobbledygook, we recommend you use the Federal Student Loan Repayment Estimator to figure out what you’ll be required to pay under ICR, at least initially.

To initially get ICR, you’ll submit an Income-Driven Repayment Plan Request and an income certification. You can do this online or on a paper form you may request from the loan servicer hired by the government to collect your FDLP debt.

To keep using ICR, update your Income-Driven Repayment Plan Request and your income certification every 12 months. Should you fail to do this, your monthly payment amount will go to what you’d pay under the Standard Repayment Plan, which usually requires the highest monthly payments of all FDLP repayment options.

Remember, you should use the FDLP repayment plan that best meets you needs given your career, financial, and personal circumstances. That may be ICR, IBR, or one of the FDLP’s conventional repayment plans. Or it may be the Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE) plans. More about those later this week.

Trying to figure out the best approach to manage and repay your student debt? Contact College Affordability Solutions at (512) 366-5354 or for a free consultation if we can help.

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