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 are looking for a solution to your student loan problem and wondering if there is one, then there is a great way to find out for free! Just click here to provide me with all the details on your loans. I will then, for free and with no obligation on your part, look at your situation to see if I can provide you with a way to deal with them. If there isn't one, it didn't cost you anything. If there is, then I will contact you to schedule an analysis session with my office to lay out a plan of action.
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.
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