Income-Contingent Repayment: Is It Best for You?

Student Loan Relief Guide

COVID-19 relief may affect information on this page. Know your options before making any decision.

Income-Contingent Repayment costs more each month than other income-driven repayment plans. ICR caps payments at 20% of your discretionary income and lasts 25 years. Still, this plan may be your best income-driven choice in the following instances:

You have parent PLUS loans or a consolidation loan that includes parent PLUS loans.
You want slightly lower payments to potentially pay less interest.

» MORE: Income-driven repayment: Is it right for you?

ICR vs. other income-driven plans

All income-driven plans share some similarities: Each caps payments to between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments. Use Federal Student Aid’s Loan Simulator to see how much you might pay under different plans.

» MORE: How are income-driven payments calculated?

If ICR doesn't sound right for you, consider one of the other three income-driven repayment plans.

- Revised Pay As You Earn (REPAYE): good for single borrowers, those without grad debt and those with higher earning potential.
- Pay As You Earn (PAYE): good for married borrowers with two incomes, those with grad school debt and those with lower earning potential.
- Income-Based Repayment (IBR): good for borrowers who don't qualify for PAYE or have FFELP loans.

ICR at a glance

• Repayment length: 25 years.

• Payment amounts: 20% of your discretionary income or fixed payments based on a 12-year loan term, whichever is lower.

• Other qualifications: Must have federal direct loans.

• Best for: Parent borrowers; slightly lower payments.

In most cases, the least confusing way to select an income-driven plan is to let your servicer place you on the plan you qualify for that has the lowest monthly payment. But specifically choosing Income-Contingent Repayment may be right for you in the following instances:

You have parent PLUS loans

Income-Contingent Repayment is the only income-driven plan open to all federal direct loan borrowers — including those with parent PLUS loans or consolidation loans that include parent PLUS loans. To qualify, parent PLUS borrowers must first consolidate their student loans, if they haven’t already. You can do this for free at studentloans.gov.

» MORE: Parent PLUS loan repayment options

You want slightly lower payments

Payments on income-contingent repayment can be a nice middle ground between standard repayment and other income-driven plans. Your bills won’t be so high that you can’t afford them — as they could be on the standard plan — and won’t be too low that interest piles up.

Because payments on ICR are higher than on other income-driven plans, you’ll tackle more of the interest as it accrues. You’ll also minimize any future costs should you get forgiveness under ICR, as the forgiven amount would be taxable.

If minimizing interest accrual is your goal, consider REPAYE instead. REPAYE offers subsidies on unpaid interest that ICR doesn’t, and you can always pay extra each month to make a greater dent in what you owe. But if you don’t think you’ll stick with making those extra payments, ICR may make more sense for you.

» MORE: REPAYE: How it works and whom it’s best for

How to apply for ICR

You must enroll in Income-Contingent Repayment. You can do this by mailing a completed income-driven repayment request to your student loan servicer, but it’s easier to complete the process online. You can change your student loan repayment plan at any time.

- - Visit studentaid.gov. Log in with your Federal Student Aid ID, or create an FSA ID if you don’t have one.
  - Select income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return.
  - Choose your plan. If you qualify for more than one income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose ICR if it makes the most sense for you.
  - Complete the application. Enter the required details about your income and family. Remember to include your spouse’s information, if applicable, as it will affect your payments under ICR.

Recertify your information to stay on ICR

To stay on the Income-Contingent Repayment plan, you must resubmit the income-driven repayment application every year. If your income changes, your payments will change, too. If you miss the recertification deadline, your payments will switch to the amount you'd pay under the standard plan.

» MORE: How to recertify income-based repayment

Other ways to pay less

If income-driven repayment isn't right for you, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.

You also may be able to pay less by refinancing your student loans. Refinancing federal student loans can be risky, as you’ll lose access to income-driven repayment and other federal loan programs and protections. But if you’re comfortable giving up those options and have strong credit as well as a steady income, refinancing may save you money.

» MORE: Should I refinance my student loans?