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Brush Up on Income-Contingent Repayment (ICR)

March 21, 2014

What is Income-Contingent Repayment (ICR)?

This plan gives the customer the flexibility to meet their Direct Loan obligations without causing undue financial hardship. Each year, the customer’s monthly payments will be calculated on the basis of their adjusted gross income (AGI, plus the spouse’s income if they are married and file a joint federal income tax return), family size, and the total amount of their Direct Loans. Under the ICR plan the customer will pay each month the lesser of:

  1. The amount they would pay if they repaid their loan in twelve years, multiplied by an income percentage factor that varies with their annual income, or
  2. Twenty percent of the customer’s monthly discretionary income (AGI-Poverty Level/12)

If the customer’s payments are not large enough to cover the interest that has accumulated on the loans, the unpaid interest will be capitalized annually.  However, the amount of unpaid interest that can be capitalized will not exceed ten percent of the original loan amount the customer owed when they entered repayment.  At that point, interest will continue to accumulate but will no longer be capitalized.

The maximum repayment period is 25 years. If the customer hasn’t fully repaid their loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged.  The customer may have to pay taxes on the amount that is discharged.

Download this PDF for more information on ICR and other Income-Driven Repayment Plans to share with your student borrowers.

Have more questions about ICR? Contact your Regional Director!

Nycci Parsons, Learning Engineer, Nelnet Partner Solutions

Nycci Parsons, Learning Engineer, Nelnet Partner Solutions

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