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ICR – What is This?

Christie_1If you have federal student loans, the Income Contingent Repayment (“ICR”) is the most expensive Income Driven Repayment Plan or IDR:

  • 20% of your discretionary income, or
  • the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.

Think of the acronyms like this.  IDR is an umbrella over all the different types of income driven plans:  ICR, Paye, SAVE, the old Repaye, IBR etc.

ICR also only uses a 100% of the poverty level of your income scale to determine your expenses while the more favorable plans such as Paye and IBR use 150% and now SAVE uses 225%.  This amount is excluded from your discretionary income.  That means that a significant portion of your income isn’t even included when determining your student loan payment.

For those with Parent Plus loans, ICR is the ONLY income driven plan that can be selected following a consolidation.  However, if you follow the procedures to do a double consolidation, you should be able to get into SAVE – provided this is done before July 1, 2025.  That is when the Department of Education will no longer allow this workaround. An added bonus is if you do this before 12/31/23, you may be in a better position for the upcoming IDR Audit particularly if you have any older loans to consolidate with the newer Parent Plus loans (either your own, or an older child who went to school earlier perhaps).  Make sure you know how to do a double consolidation and understand the risks before you combine your own loans with Parent Plus loans however.

There are a few borrowers with lower principal amounts where the second calculation of a fixed payment over 12 years would be less.  We don’t use that very often, but it will work well for some.

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