Sometimes the right loan repayment plan can totally revamp your ability to pay back your student loans and get rid of your student loan debt. Although you are required to select a repayment plan when you initiate repaying your student loan, you may change the repayment plan any time by contacting the borrower or by consolidating multiple student loans.
There are many repayment plans available for federal student loans such as standard plan, extended plan, graduated plan, income-driven plans, income-sensitive plans, and pay-as-you-earn plan. The selection of repayment plan depends on your income, type of loan, and personal preferences.
Income-Contingent Repayment Plan (ICR)
Income-contingent loan repayment plan is designed to help students pay back their federal student loans without facing financial hardships. It has a repayment term of 25 years during which the borrower is required to make monthly payments based on their income, family size, and principal amount.
The income-contingent repayment plan is quite similar to the income-based repayment plan except that the applicant is not required to be facing a partial financial hardship in order to qualify for the income-contingent repayment plan. In the income-contingent plan, the monthly payments are usually 20 percent of the borrower’s discretionary income.
How does it Work?
The income-contingent repayment plan lays out monthly payments based on the applicant’s family size, gross income, and the total amount of all federal student loans. The amount of monthly installments is adjusted annually based on the income and family size.
After 25 years or 300 qualifying monthly installments, the remaining principal amount is forgiven. However, the discharged amount is taxable, which means that the candidate will have to pay income tax on the remaining debt. Individuals working in public service organizations may qualify for loan discharge under the Public Service Loan Forgiveness after 10 years of making qualifying monthly payments.
Eligibility Requirements for Income-Contingent Repayment Plan
The following loans are eligible for income-contingent repayment plan:
- All Direct unsubsidized and subsidized loans
- All Direct Consolidation loans
- All Direct PLUS loans given to students
The following loans qualify for income-contingent repayment plan only when they are consolidated:
- All Direct PLUS loans given to parents
- All unsubsidized and subsidized FFEL loans
- All FFEL PLUS loans given to students and parents
- All FFEL Consolidation loans
- Federal Perkins loans
Why Should You Choose the Income-Contingent Repayment Plan
The income-contingent loan repayment plan provides an easy and affordable way of repaying the student loan debt to individuals who have low monthly incomes. After 10 years of payment, individuals working in public service organizations can get any outstanding loan waived off under the Public Service Loan Forgiveness Program. Although the repayment term is of 25 years, individuals have the liberty to pay off their student loans more quickly if their financial circumstances allow them to.
Complex paperwork is required for the income-contingent repayment plan because an application containing up-to-date information on income and family size is to be submitted every year. Also, the repayment term is longer as compared to the standard repayment plan, which means that you will be repaying a higher amount overall.
How Fast Track Preparation Can Help You?
The US Department of Education provides several flexible repayment plans to students who have a high debt relative to their income such as the Pay as You Earn repayment plan, income-based repayment plan, and income-contingent plan. However, each repayment plan has different qualifying requirements and unique benefits and drawbacks.
Fast Track Preparation is dedicated to help you choose the most affordable repayment plan for your student loan debt. We provide assistance in understanding the complex loan repayment plans. Our expert team can also help you in understanding the ins and outs of all loan repayment plans.
If you want to get rid of your student loan debt, contact us. We will guide you in selecting the best repayment plan so that you do not miss out on a financial opportunity. Call us today at 888-369-0973