Income-Contingent Repayment (ICR)

Income-Contingent Repayment is a federal student loan repayment plan under which the payment is the lesser of a fixed twelve-year payment multiplied by an income-based factor or 20 percent of the borrower's discretionary income divided by twelve, with cancellation of any balance after 300 qualifying payments over at least 25 years. The phrase has to be handled carefully because it refers to two different things. 20 USC 1087e(d)(1)(D) authorizes "an income contingent repayment plan" as a category, and the Department of Education uses the phrase that way, describing income-contingent repayment payments as those made under the ICR, Pay As You Earn, or REPAYE and SAVE plans. But 34 CFR 685.209(a)(4) names one particular plan, "The Income-Contingent Repayment (ICR) plan", with its own formula and its own eligibility rules. The distinction matters most when reading about the repeal: Public Law 119-21 struck out the statutory authority at 20 USC 1087e(e) effective July 1, 2028, which ends all three plans built on it, and a sentence about "income-contingent repayment being repealed" is describing that authority rather than the specific plan alone.

Three things ended in three different ways, and conflating them is the common error in this territory. Pay As You Earn and Income-Contingent Repayment were closed to new enrollment by regulation, through an eligibility condition requiring the borrower to have already been repaying under the plan on July 1, 2024. The statutory authority underneath them was repealed by Congress: the editorial notes to 20 USC 1087e record that Public Law 119-21 section 82001(c)(1) "struck out subsec. (e) which related to income contingent repayment", effective July 1, 2028. REPAYE, which the regulation also calls SAVE, is in a third position: it was enjoined and the Department has committed not to implement it, so it is unavailable in fact rather than closed by rule. A regulatory closure, a statutory repeal and a court order have different futures, and only the second is permanent by its own terms.

The formula, and why it is the harshest of the three. Under 34 CFR 685.209(f)(4)(i) the payment is the lesser of what the borrower would pay on a fixed twelve-year schedule based on the amount owed when they entered the plan, multiplied by a percentage set by the borrower's income "as established by the Secretary in a Federal Register notice published annually to account for inflation", or 20 percent of discretionary income divided by twelve. Three features make it more expensive than Income-Based Repayment or Pay As You Earn on the same facts. Discretionary income for this plan means income above 100 percent of the applicable poverty guideline rather than 150 percent (685.209(b)(4)(iii)), so less income is protected. The rate applied to what remains is 20 percent rather than 10 or 15. And there is no interest subsidy whatsoever: 685.209(h)(3) provides simply that "Under the ICR plan, the Secretary charges all accrued interest to the borrower", where the other two plans absorb unpaid interest on subsidized loans for the first three years. One further difference cuts the same way, and it is worth stating precisely because the shorthand version overstates it. Under the other plans a calculated payment below $5 becomes $0, and one from $5 to under $10 becomes $10 (685.209(g)(1)(iii)). Under this plan a calculated payment above $0 but not more than $5 is rounded up to $5 instead (685.209(g)(2)). So a borrower with a small positive discretionary income pays $5 here where the same figures would produce nothing under Income-Based Repayment. A borrower whose income is at or below the poverty guideline does still have a $0 payment, because the calculation itself produces $0 and the rounding rule reaches only amounts above it.

The exception that keeps it alive, and it is the reason to read this page. A parent PLUS loan cannot use any income-driven plan on its own. 20 USC 1087e(d)(1)(D) excludes "the borrower of a Federal Direct PLUS loan made on behalf of a dependent student" from the income-contingent plan, 20 USC 1098e(b)(1) excludes an excepted PLUS loan from Income-Based Repayment, and 20 USC 1087e(d)(1)(F)(i) excludes excepted loans from the Repayment Assistance Plan. Consolidating the loan produces a Direct Consolidation Loan, which is a legally different loan, and that is where this plan becomes the only door. 34 CFR 685.209(d)(3) makes eligible for this plan "all Direct Consolidation Loans (including excepted consolidation loans), except for Direct PLUS Consolidation Loans made before July 1, 2006", while the paragraphs governing Income-Based Repayment and the Repayment Assistance Plan both exclude excepted consolidation loans. So through June 30, 2028 a borrower may choose this plan for a Direct Consolidation Loan disbursed on or after July 1, 2006 that repaid a parent PLUS loan (685.209(c)(5)(ii)(A)); and where such a consolidation loan was disbursed on or after July 1, 2025, the borrower "may not choose any IDR plan except the ICR plan" (685.209(c)(5)(iii)(A)). Both routes fail if the borrower received a Direct Loan on or after July 1, 2026.

What one payment under the plan accomplishes. An "excepted consolidation loan" is defined at 685.209(b)(6)(i) as a consolidation loan that repaid a parent PLUS loan, and paragraph (b)(6)(ii) then excludes from that definition any such loan "that was being repaid under the ICR, PAYE, or IBR plans on any date on or after July 4, 2025, through and including June 30, 2028", adding that "being repaid means at least one payment was made" under one of those plans. The statute carries the same exclusion at 20 USC 1098e(a)(2)(B), in slightly wider terms: repayment "pursuant to the Income Contingent Repayment (ICR) plan" or "pursuant to another income driven repayment plan". Because this plan is the only one of the three such a loan can actually enter, the payment in practice has to be made here. Once the loan is no longer an excepted consolidation loan, the exclusion that kept it out of Income-Based Repayment falls away. This is a regulatory condition rather than a Department process: the Department expressly declined a request to build a servicer workflow around it, so it is worth confirming the loan's status directly rather than assuming a switch happens by itself.

A feature unique to this plan. Married borrowers may elect to repay their loans jointly under it (685.209(f)(4)(ii)). The outstanding balances of both borrowers are added together to produce a combined payment, and each borrower's share is the same proportion as their debt is of the combined balance, with payments credited to outstanding interest before principal. Related to that, 685.209(e)(2)(ii) provides that under this plan a spouse's loans enter the calculation only if the couple elects joint repayment, which is a narrower rule than the other plans use.

The end, and what survives it. Every borrower on the plan, or in an administrative forbearance associated with it, must elect a different plan before July 1, 2028, choosing from the Repayment Assistance Plan, Income-Based Repayment, a standard, graduated or extended plan, or, through June 30, 2028 only, this plan or Pay As You Earn (685.209(c)(7)(i)). A borrower who elects nothing is moved to the Repayment Assistance Plan, or to Income-Based Repayment for loans the newer plan cannot take. Payments made under this plan on or before June 30, 2028 count toward Income-Based Repayment's forgiveness total (685.209(k)(4)(i)(B)), and they count as qualifying payments for public service loan forgiveness under 20 USC 1087e(m)(1)(A)(iv), which reaches payments made under an income-contingent repayment plan carried out under the authority as it stood before the repeal. Once the plan ceases to exist there are no further payments of that kind to make, and credit already earned is not withdrawn. Missing the annual recertification sets the payment to the ten-year standard amount based on the balance when the borrower entered the plan (685.209(l)(9)(ii)). And cancellation at the end of the term is generally taxable income again for discharges after December 31, 2025.

A borrower already in the plan certifies income annually, the servicer applies whichever of the two calculations produces the smaller figure, and each qualifying month counts toward 300. The plan closes to everyone on July 1, 2028.

A hypothetical example, resolving eligibility rather than an amount, because eligibility is what this plan is really about.

Rosa borrowed $48,000 in parent PLUS loans for her son. Those loans on their own can use no income-driven plan: the statute excludes a parent PLUS borrower from the income-contingent plan, excludes an excepted PLUS loan from Income-Based Repayment, and excludes excepted loans from the Repayment Assistance Plan. In 2024 she consolidated them into a Direct Consolidation Loan.

Step one, what the consolidation loan can do. The new loan is an "excepted consolidation loan" because it repaid a parent PLUS loan. 34 CFR 685.209(d)(3) admits all Direct Consolidation Loans to this plan, including excepted ones, so long as they were not Direct PLUS Consolidation Loans made before July 1, 2006. The paragraphs for Income-Based Repayment and the Repayment Assistance Plan both exclude excepted consolidation loans. So Income-Contingent Repayment is the only income-driven plan open to Rosa's loan, and if the consolidation had been disbursed on or after July 1, 2025 the regulation would say so explicitly.

Step two, what one payment changes. If at least one payment is made under the plan on a date from July 4, 2025 through June 30, 2028, the loan stops being an excepted consolidation loan under 685.209(b)(6)(ii). The exclusion that kept it out of Income-Based Repayment no longer applies, which matters because Income-Based Repayment has no sunset while this plan ends in 2028. The Department has described such loans as then moving to Income-Based Repayment and retaining eligibility for public service loan forgiveness.

Step three, what closes the route. Two dates end it. The borrower must not have received a Direct Loan on or after July 1, 2026, which disqualifies the exception outright. And only Direct Loans made before July 1, 2026 may be repaid under this plan at all (685.209(d)(5)), so a consolidation loan disbursed on or after that date cannot enter the plan and therefore cannot satisfy the one-payment condition. Rosa's 2024 consolidation is inside both limits; a parent who consolidates now is not. Figures are illustrative.

Pros

• It is the only income-driven plan a consolidation loan that repaid a parent PLUS loan can use, and for some of those loans it is the only income-driven plan of any kind.
• A payment under it can remove the status that locks such a loan out of Income-Based Repayment, which has no sunset.
• Payments count toward public service loan forgiveness and carry across to Income-Based Repayment's forgiveness total if made by June 30, 2028.
• The payment is capped by the twelve-year calculation, so it is not simply 20 percent of discretionary income in every case.
• Married borrowers may elect to repay jointly, which no other plan offers.

Cons

• It protects only income up to 100 percent of the poverty guideline, where Income-Based Repayment and Pay As You Earn protect up to 150 percent.
• It charges 20 percent of what remains, against 15 percent under Income-Based Repayment and 10 percent under Pay As You Earn.
• There is no interest subsidy at all, so unpaid accrued interest is charged in full from the first month.
• A small positive payment is rounded up to $5 rather than down to $0, so a low income produces a payment here where Income-Based Repayment would produce none.
• Cancellation takes 300 payments over at least 25 years.
• It is closed to new enrollment and ends on July 1, 2028, so nobody can plan around it for long.
• One of its two inputs is an income percentage factor published annually in a Federal Register notice, which makes the payment harder to estimate in advance than the other plans' arithmetic.