Accordion: Income-Contingent Repayment

This plan gives you the flexibility to meet your Direct Loans obligations without causing undue financial hardship.  Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans.  Under the ICR plan you will pay each month the lesser of:

1. The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
2. 20 percent of your monthly discretionary income. 
   If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year.  However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment.  Interest will continue to accumulate but will no longer be capitalized (added to the loan principal).

The maximum repayment period is 25 years.  If you haven't fully repaid your loans after 25 years (time spent in deferment or forbearance does not count) under this plan, the unpaid portion will be discharged.  You may, however, have to pay taxes on the amount that is discharged.

As of July 1, 2009, graduate and professional student Direct PLUS Loan borrowers are eligible to use the ICR plan.  Parent Direct PLUS Loan borrowers are also eligible for the ICR repayment plan.