What is the income-contingent repayment plan?




While the income-contingent repayment plan is currently an option for borrowers with eligible federal student loans, political winds in the student loan landscape have shifted in 2025 with the new administration. In late April of this year, Republicans on the House education committee recommended replacing current income-driven repayment plans with a single new program referred to as the “Repayment Assistance Plan.”
Stay tuned for further updates on this pending legislation and what it could mean for your student loans.
Key takeaways
- Several income-driven repayment plans can help federal student loan borrowers lower their monthly payments based on their income and family size.
- These options include the income-contingent repayment plan, which typically bases monthly student loan payments on 20 percent of your discretionary income.
- While online applications for income-driven repayment plans were temporarily paused in early 2025, access has been restored since March 26, 2025.
For the time being, the U.S. Department of Education still offers several options for student loan borrowers who can’t afford the standard 10-year repayment plan. Income-contingent repayment is a plan that lowers your monthly payment based on your income and family size, and it’s the only available income-driven repayment plan for parent PLUS borrowers.
Income-contingent repayment can make monthly payments more manageable for individuals with federal student loan debt, but it’s not the right choice for everyone. Here’s what to know about the plan and whether it’s best for your student loans.
What is income-contingent repayment?
Income-contingent repayment is one of several income-driven repayment plans you can apply for to lower your federal student loan payments. The plan considers your income and family size and adjusts your monthly payments accordingly.
With the income-contingent repayment plan, or ICR plan, the amount you pay will be the lesser of:
- 20 percent of your discretionary income
- The amount you would pay on a fixed repayment plan for 12 years, adjusted based on your income
The payment term under the ICR plan is 25 years. Any balance that remains at the end of the term will be forgiven.
Who qualifies for the income-contingent repayment plan?
You may qualify for the ICR plan if you have the following eligible federal student loans:
- Direct Unsubsidized and Subsidized Loans
- Direct Consolidation Loans
- Direct PLUS Loans (taken out by graduate or professional students)
You might also be able to participate in an ICR plan if you consolidate noneligible loans — including parent PLUS loans, FFEL Program Loans and Perkins Loans — into a Direct Loan first. However, if you have private student loans or federal student loans in default status, you won’t qualify.
It’s worth noting that income-contingent repayment is the only relief plan available to borrowers with parent PLUS loans (after eligible student loan consolidation). The other income-driven repayment plans don’t accept Direct Consolidation Loans that repaid parent PLUS loans.
How to calculate income-contingent repayment monthly payments
For many borrowers, the monthly payment amount under the ICR plan will be 20 percent of their discretionary income.
With the ICR plan, use the following formula to calculate your discretionary income:
Annual income – 100 percent of poverty guideline for state and family size = Discretionary income
Next, calculate 20 percent of your discretionary income to determine your monthly payment amount.
If your income or family size changes, your payment may also change. You’ll have to recertify your income every year you remain on the plan. And since the repayment term on the ICR plan lasts 25 years, there’s a lot of opportunity for change. However, your payment amount cannot exceed the amount you would pay under a fixed repayment plan (based on your income) with a 12-year loan term.
Income-contingent repayment vs. income-based repayment
The income-based repayment plan, or IBR plan, is another popular student loan relief option. While there are some similarities between income-contingent repayment and income-based repayment plans, understanding the differences can help you determine whether either option is right for you.
Income-contingent repayment |
Income-based repayment |
|
Monthly payment amount |
The lesser of: 20% of your discretionary income, or what you’d pay on a plan with fixed payments for 12 years (adjusted to income size) |
10% or 15% of your discretionary income (depending on when you took out your loans) |
Repayment term |
25 years |
20 or 25 years (depending on when you took out your loans) |
Recertify income |
Every year |
Every year |
Eligible loans |
Direct Unsubsidized Loans, Direct Subsidized Loans, grad PLUS loans, Direct Consolidation Loans (including those that repaid parent PLUS loans, FFEL loans and Perkins Loans) |
Direct Unsubsidized Loans, Direct Subsidized Loans, grad PLUS loans, FFEL loans for students, Direct Consolidation Loans that did not repay loans made to parents |
Best for |
Parents |
Student borrowers with FFEL loans |
Is the income-contingent repayment plan right for you?
The income-contingent repayment plan is one of the least popular income-driven repayment options since you’ll pay a larger portion of your discretionary income each month than with most other plans. However, if you’re a parent searching for a lower payment, the ICR plan is the only income-driven repayment plan that accepts parent PLUS loans (once they’ve been consolidated).
Your student loan servicer can crunch the numbers to help you determine which income-driven repayment plan is the most affordable, but it’s wise to do your own research and calculations too. You can use the free Loan Simulator tool from Federal Student Aid to compare multiple options.
There are alternatives to consider if an income-driven repayment plan doesn’t seem like a good fit. For example, refinancing your student loan with a private lender might result in a lower interest rate that could save you money, but you would lose access to valuable federal student loan benefits.
Bottom line
An income-contingent plan requires you to devote more of your discretionary income to your payments than an income-based repayment plan. However, it may still be the best plan to meet your needs. If you want to pay off your loans as fast as possible and can’t afford the standard plan, an income-contingent plan might make the most sense. It’s also the only income-driven plan for borrowers with parent PLUS loans.
Frequently asked questions
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