Income-Contingent Repayment, or ICR, is the oldest income-driven repayment plan for federal student loans. It caps your monthly payment at 20% of your discretionary income and forgives any remaining balance after 25 years of qualifying payments. First offered in 1994 through the Direct Loan Program, ICR is now being phased out for most borrowers. It matters today primarily for one group: parents who borrowed Parent PLUS loans and consolidated them, since ICR is the only income-driven plan those borrowers can use.
How ICR Calculates Your Monthly Payment
Your servicer runs two calculations each year and charges you whichever is lower. The first takes 20% of your discretionary income. The second multiplies the monthly payment you would owe on a standard 12-year fixed schedule by an income percentage factor the Department of Education updates annually in the Federal Register.1Federal Register. Annual Updates to the Income-Contingent Repayment (ICR) Plan Formula for 2024 The smaller number becomes your payment for the next 12 months.
The discretionary income calculation is where ICR differs most from every other income-driven plan. Your servicer takes your Adjusted Gross Income from your most recent federal tax return and subtracts 100% of the federal poverty guideline for your family size and state.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans Income-Based Repayment and PAYE subtract 150% of the guideline. The SAVE plan, when active, subtracted 225%. Because ICR uses the smallest deduction, it counts more of your income as discretionary and typically produces a higher monthly payment than other income-driven plans at the same income level.
For 2026, the federal poverty guideline for the 48 contiguous states is $15,960 for a single-person household, $21,640 for a household of two, $27,320 for a household of three, and $33,000 for a household of four.3HHS ASPE. 2026 Poverty Guidelines – 48 Contiguous States A single borrower earning $50,000 would have discretionary income of $34,040 under ICR ($50,000 minus $15,960). Twenty percent of that is roughly $567 a month. Under a plan using 150% of the guideline, discretionary income for the same borrower would drop to $26,060; at 225%, it would fall to $14,090.
If your monthly ICR payment doesn’t cover all the interest accruing on your loans, unpaid interest is added to your principal. That capitalization stops once your outstanding principal reaches 10% above what you owed when you entered repayment.4ED.gov. Eliminate Interest Capitalization for Non-Statutory Capitalizing Events After that, interest keeps accruing but doesn’t fold back into the balance you’re charged interest on.
Who Can Still Enroll in ICR
ICR is closed to most new borrowers. Under current federal regulations, you can enroll only if you were already repaying under ICR as of July 1, 2024, or if you fall into one of two Parent PLUS categories.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans A borrower who was on ICR before that date and later switched plans cannot re-enroll unless one of the Parent PLUS exceptions applies.
The two open pathways are:
- You consolidated a Parent PLUS Loan into a Direct Consolidation Loan disbursed on or after July 1, 2006. ICR is available to you.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
- Your Direct Consolidation Loan was disbursed on or after July 1, 2025, and it repaid a Parent PLUS loan. ICR is your only income-driven option.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
Which Loans Qualify
ICR accepts Direct Subsidized and Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students (not to parents), and all Direct Consolidation Loans, including those that repaid Parent PLUS Loans.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
That last item is the critical distinction. ICR is the only income-driven plan that accepts a Direct Consolidation Loan containing Parent PLUS debt. Under IBR, PAYE, and SAVE, a consolidation loan that repaid a Parent PLUS Loan is specifically excluded.2eCFR. 34 CFR 685.209 – Income-Driven Repayment Plans
Loans that do not qualify include Parent PLUS Loans in their original unconsolidated form, defaulted loans, and loans from the older Federal Family Education Loan or Perkins Loan programs.5Edfinancial Services. Income-Contingent Repayment (ICR) FFEL and Perkins borrowers once used consolidation to reach ICR, but with the current enrollment restrictions that pathway is effectively closed unless you already had ICR before July 1, 2024, or are consolidating Parent PLUS debt.
The Parent PLUS Pathway and the 2026 Deadline
Parent PLUS Loans in their original form are not eligible for any income-driven plan. To reach ICR, a parent borrower must first consolidate the Parent PLUS Loan into a Direct Consolidation Loan. The resulting consolidation loan becomes ICR-eligible. Once on ICR, a parent borrower working for a qualifying public service employer can also pursue Public Service Loan Forgiveness, which discharges the remaining balance after 120 qualifying payments instead of 300.6Consumer Financial Protection Bureau. Options for Repaying Your Parent PLUS Loans
Federal legislation eliminates the ability for Parent PLUS borrowers to consolidate and enroll in an income-driven repayment plan after June 30, 2026. If you have Parent PLUS loans and want ICR, the consolidation must be complete by that date. Processing can stretch to several weeks, so waiting until the last minute is risky. After the deadline, new Parent PLUS loans will only be eligible for the Standard Repayment Plan.
How to Apply and Recertify
All income-driven plans use the same form: the Income-Driven Repayment Plan Request (OMB No. 1845-0102).7Federal Student Aid. Income-Driven Repayment Plan Request Form You can submit it online at StudentAid.gov or request a paper copy from your loan servicer. The form asks for your family size, your Adjusted Gross Income from your most recent tax return, and information about your spouse’s income and student loan debt if you’re married. If your last tax return doesn’t reflect what you earn now, you can submit recent pay stubs instead.5Edfinancial Services. Income-Contingent Repayment (ICR) Expect processing to take up to 60 days.8Federal Student Aid. Top FAQs About Income-Driven Repayment Plans
Your tax filing status matters. If you file jointly, your servicer factors in combined household income. If you file separately, only your individual income counts.9Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt For a borrower whose spouse earns significantly more, filing separately can produce a much lower ICR payment, though it means losing tax benefits reserved for joint filers.
Staying on ICR requires recertifying your income and family size every year, even if nothing has changed. Miss the deadline and your monthly payment reverts to what you would owe under the standard 10-year schedule, which is typically a steep jump. Unpaid accrued interest may also capitalize into principal at that point. Once you recertify, your payment returns to the income-based calculation, but the months at the inflated amount and any capitalized interest can’t be undone.
Forgiveness After 25 Years, and the Tax Bill
Any balance remaining after 25 years of qualifying monthly payments is forgiven.5Edfinancial Services. Income-Contingent Repayment (ICR) Months in which your required payment was $0 because of low income count toward that 25-year total. Months in forbearance or deferment generally do not, unless a specific exception applies. You have to stay continuously enrolled and recertify annually to keep the clock running.
Historically, the IRS treated the forgiven balance as taxable income. The American Rescue Plan Act temporarily excluded discharged student loan debt from gross income for tax years 2021 through 2025.10Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness That exclusion expired at the end of 2025. Starting in 2026, forgiven balances under an income-driven plan are once again included in gross income for federal tax purposes unless another exclusion applies. For a borrower who reaches the 25-year mark with $80,000 forgiven, the resulting tax bill can reach five figures depending on the bracket. Some states also tax forgiven debt. If your total liabilities exceed your total assets at the time of discharge, IRS insolvency relief may reduce or eliminate the tax hit.
The ICR Sunset and What Replaces It
ICR is scheduled to end entirely by July 1, 2028.11Federal Register. Income-Contingent Repayment Plan Options Borrowers still on the plan then will need to switch to Income-Based Repayment or the new Repayment Assistance Plan, or their servicer will transition them automatically.
The Repayment Assistance Plan, or RAP, launches July 1, 2026, and will be the sole income-driven option for anyone taking out new Direct Loans after that date. RAP applies a graduated percentage of your Adjusted Gross Income, rising from 1% for incomes between $10,000 and $20,000 up to 10% for incomes above $100,000. Forgiveness comes after 30 years rather than 25. Parent PLUS loans will not be eligible for RAP, which is why the June 30, 2026, consolidation deadline is so significant for parent borrowers.
The rules for income-driven repayment have been shifting since 2024, with court injunctions blocking SAVE and multiple rounds of rulemaking changing enrollment criteria.12Federal Student Aid. IDR Plan Court Actions – Impact on Borrowers If you’re on ICR now, check StudentAid.gov for updates and talk to your servicer before switching plans. Time on ICR counts toward both the 25-year forgiveness timeline and PSLF when you move to another qualifying income-driven plan, so a transition when the time comes won’t erase the progress you’ve made.