8 Student Loan Repayment Plans Explained

4. Income-Contingent Repayment (ICR)

What it is: ICR sets payments based on your income, family size, and loan amount; it’s the only standard IDR option available for some Parent PLUS borrowers, but Parent PLUS loans must be consolidated into a Direct Consolidation Loan to use ICR. Who it fits: Borrowers with variable finances or Parent PLUS borrowers considering consolidation. How payments work: The calculation considers adjusted gross income and family size; payments can be a percentage of income or a calculated alternative method whichever is lesser. Pros: Can make payments affordable for borrowers with lower current income; offers forgiveness after a long qualifying period. Cons: It can leave you with higher balances over time relative to newer IDR plans; consolidation to qualify can change loan terms. How to decide: If you’re a parent borrower, weigh the loss of some benefits against the payment relief ICR may provide. Action steps: Talk to your servicer about consolidation specifics and run ICR estimates before consolidating.