Income-Sensitive Repayment
Encyclopedia
There are a number of loan
repayment options available to U.S. federal student loan
borrowers, including some that are based on the borrower’s income
. Income-sensitive repayment lets Federal Family Education Loan Program
(FFELP) borrowers decide what percentage of their income their loan payment will be. Income-sensitive repayment (ICR) is one such option.
accruing on the loan. The borrower must reapply for this schedule every year. It is available for up to 5 years.
After 5 years, the borrower will need to choose another repayment schedule. The borrower may have up to 10 additional years under a new schedule.
Income-sensitive repayment extends the repayment period. As a result, the total amount paid in interest may be greater than what the borrower would pay under standard repayment.
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
repayment options available to U.S. federal student loan
Student loan
A student loan is designed to help students pay for university tuition, books, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education...
borrowers, including some that are based on the borrower’s income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
. Income-sensitive repayment lets Federal Family Education Loan Program
Federal Family Education Loan Program
The Federal Family Education Loan Program was the second largest of the U.S. higher education loan programs . The FFEL was initiated by the Higher Education Act of 1965 and was funded through a public/private partnership administered at the state and local level...
(FFELP) borrowers decide what percentage of their income their loan payment will be. Income-sensitive repayment (ICR) is one such option.
How It Works
The borrower selects a monthly payment amount between 4%–25% of his or her monthly income. The payment must be greater than or equal to the interestInterest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
accruing on the loan. The borrower must reapply for this schedule every year. It is available for up to 5 years.
After 5 years, the borrower will need to choose another repayment schedule. The borrower may have up to 10 additional years under a new schedule.
Income-sensitive repayment extends the repayment period. As a result, the total amount paid in interest may be greater than what the borrower would pay under standard repayment.