How Income Contingent Repayment Plan is Calculated

Once the go to plan that was based on your income, similar to the Income-Sensitive Repayment Plan, the Income Contingent Repayment (ICR) schedule has fallen by the wayside.   It is still commonly used though by those with higher income and most commonly by those who have Parent PLUS loans (do remember that in order to qualify, this loan must still be consolidated first).

The ICR can be determined in one of two ways:

1)  The first way is way too confusing and honestly I myself always have to look it up and probably couldn’t calculate by hand if I tried but here it is:

“The amount repaid annually over 12 years under standard amortization multiplied by the income percentage factor corresponding to the borrower’s Adjust Gross Income (AGI) divided by 12.

The second way is far easier and much more in line with how the IBR and PAYE plans are calculated:

“20% x <AGI-100% of the poverty line according to income and family size>/12

Where this differs from the IBR and PAYE is both are with 150% of the poverty line and for the old IBR (before the White House initiative) is 15% where as the PAYE plus the IBR for borrower who have loans after 7/1/14 is 10%.