What Is an ICR Plan? Eligibility and How to Apply

The Income-Contingent Repayment (ICR) plan offers federal student loan borrowers a way to manage their monthly payments based on their income and family size. This option is one of several income-driven repayment (IDR) plans designed to make loan payments more affordable. The primary goal of the ICR plan is to prevent loan defaults by adjusting payment amounts to align with a borrower’s financial capacity.

Overview of the ICR Plan

The ICR plan calculates your monthly payment based on your income and family size. Your monthly payment amount is the lesser of 20% of your discretionary income or the amount you would pay on a fixed 12-year repayment plan, adjusted according to your income. This structure ensures that payments remain affordable even if your income fluctuates.

Discretionary income is defined as your Adjusted Gross Income (AGI) minus 100% of the federal poverty guideline for your family size and state of residence. This calculation differs from other IDR plans, which typically use a higher percentage of the poverty guideline, potentially leading to higher payments under ICR. Payments are recalculated annually based on updated income and family size information.

The maximum repayment period is 25 years. After this, any remaining loan balance is forgiven. Any forgiven amount may be considered taxable income by the Internal Revenue Service (IRS).

Interest continues to accrue on your loan balance while you are in the ICR plan. Unpaid interest may capitalize, meaning it is added to your principal balance, which can increase the total cost of your loan over time. Unlike some other IDR plans, the ICR plan does not offer an interest subsidy.

Determining Your Eligibility

The ICR plan is available for Direct Loan borrowers, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and Direct Consolidation Loans. Borrowers must be in good standing; defaulted loans are generally not eligible unless the application is part of a default resolution strategy.

Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loans are not directly eligible for ICR. However, these loans can become eligible if they are first consolidated into a Direct Consolidation Loan. Direct Parent PLUS loans also qualify for ICR after consolidation into a Direct Consolidation Loan.

While consolidation can open eligibility for the ICR plan, it means the original loans are considered paid off and no longer exist. Consolidating loans may also affect eligibility for certain benefits or repayment options, so borrowers should evaluate their specific situation carefully.

Preparing for Your Application

Before applying for the ICR plan, gathering all necessary information and documentation is important. You will need a verified Federal Student Aid (FSA) ID to access the online application portal. This ID serves as your digital signature for federal student aid websites.

Income documentation is a primary requirement for an ICR application. The most common form of documentation is your most recent federal income tax return or an IRS tax return transcript. If your income has changed significantly since your last tax return was filed, or if you did not file a tax return, you may need to provide alternative documentation. This could include recent pay stubs, a letter from your employer, or other official statements.

In addition to income, you will need to provide information about your family size. This includes yourself, your spouse if applicable, and any children or other dependents who receive more than half of their support from you. Accurate family size information is important because it directly influences the calculation of your discretionary income and, consequently, your monthly payment amount. The official application form can be found on the StudentAid.gov website or obtained directly from your loan servicer.

Submitting Your ICR Plan Application

Once information and documentation have been prepared, you can proceed with submitting your ICR plan application. The quickest method for submission is online through the StudentAid.gov website. This online portal guides you through the process of entering your personal, financial, and family size details.

When applying online, you may have the option to provide consent for the Department of Education to access your federal tax information directly from the IRS. This data retrieval tool can expedite the processing of your application by eliminating the need to manually upload income documents. If you do not provide this consent or if the tool is unavailable, you will need to manually submit your income documentation.

After submitting your application, you should receive a confirmation. Loan servicers may apply a forbearance to your account while the request is being processed to prevent missed payments. Borrowers are required to recertify their income and family size annually to remain on the ICR plan.