If you have federal student loans and find your payments challenging, the Income-Contingent Repayment (ICR) Plan can offer relief by adjusting your monthly payments according to your income and family size. Established as the original income-driven repayment option, the ICR Plan remains particularly important for borrowers with consolidated Parent PLUS Loans.

How Does the ICR Plan Work?

The ICR Plan calculates your monthly payment as the lesser of:

  1. 20% of your discretionary income, or
  2. The amount you would pay on a fixed 12-year repayment plan, adjusted based on your income.

Discretionary income for this plan is defined as the difference between your adjusted gross income (AGI) and 100% of the federal poverty guideline for your family size and state. For example, if your AGI is $50,000 and the poverty guideline for a household of one is $15,060 (2024 figures), your discretionary income is $34,940. This results in a monthly payment of about $582 under the 20% calculation.

This formula differs from other income-driven repayment plans, which typically use 150% or 225% of the poverty guideline, often resulting in lower payments. The unique dual-calculation approach may sometimes make ICR payments higher than other plans like the Revised Pay As You Earn (REPAYE) Plan.

Eligibility for the ICR Plan

The ICR Plan is available for most federal Direct Loans, including:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans

Critically, it is the only income-driven repayment option for borrowers with consolidated Parent PLUS Loans. Parent PLUS loans that aren’t consolidated or Federal Family Education Loan (FFEL) Program loans are not eligible unless consolidated into a Direct Consolidation Loan.

Pros and Cons of the ICR Plan

Pros:

  • Can reduce monthly payments compared to the standard 10-year plan.
  • Forgives remaining loan balance after 25 years of qualifying payments (300 months).
  • Available for consolidated Parent PLUS Loan borrowers.
  • No requirement to demonstrate partial financial hardship.

Cons:

  • 20% discretionary income calculation tends to be higher than other plans like SAVE (5-10%).
  • Longer repayment period may increase total interest paid.
  • Possible loan balance growth if payments do not cover interest.
  • Forgiven amount may be taxable as income (temporary relief through 2025).

Important Considerations

  • Annual recertification of income and family size is required. Missing recertification may lead to a payment increase to the standard plan amount and interest capitalization.
  • For many borrowers, more recent plans such as the SAVE Plan offer lower payments.
  • Forgiveness tax implications should be planned for with a financial advisor.

Common Questions

Is ICR the same as the SAVE Plan? No. SAVE generally offers lower payment options with a more generous calculation of discretionary income.

What if my income drops to zero? Your payment can be $0, and payments during this time still count toward loan forgiveness.

Who should consider ICR? Borrowers with consolidated Parent PLUS Loans or those unable to qualify for other income-driven plans.

For more information, visit the Income-Contingent Repayment Plan page on StudentAid.gov.

Related topics you might find helpful include Parent PLUS Loan and Student Loan Consolidation.