One of the great things about federal student loans are the many that plans exist to help you find an affordable payment, two of which are income based. If you are the student borrower, you have Income Based Repayment IBR. But what if you are the parent with a Parent PLUS loan?
ICR is for Parents
That is where Income Contingent Repayment (ICR) comes in. Like IBR, it bases your monthly payment on your yearly adjusted gross income (AGI), family size, and loan amount. Each year your payment is readjusted in accordance with the AGI as reported on your federal tax return. It can cap your payment at 20% of your disposable income, and never be higher than a 12 year amortized fixed payment. Thus, as your income rises or falls, so do your payments.
Also, as with IBR, after 25 years, any remaining balance on the loan will be forgiven! You may have to pay taxes on the amount forgiven, but the law may change by the time your payment plan ends.
What Loans Qualify?
To qualify, you must first have a Direct Loan, not one obtained through the Federal Family Education Loan (FFEL) program. If you have a FFEL loan, you must consolidate them into a Direct Loan, being sure not to include any of the student's Stafford, Perkins, or Graduate PLUS loans.
Second, you must authorize the IRS to inform the U.S. Department of Education of the amount of your income. This information will be used to calculate your repayment amount, which will be adjusted annually to reflect changes in your AGI. The downside is that if you are married, you must use your joint AGI, even if your spouse is not named in the loan.
What Do I Do?
If you live in southern New Jersey and would like to consult with me on your loans and how to get an affordable payment plan, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your case.
If you would like more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.