Income Contingent Repayment (ICR) Plan

A repayment plan that bases your monthly payment on your yearly income, family size, and loan amount. As your income rises or falls, so do your payments. After 25 years, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.

Each year your monthly payment will be based on your family size, annual Adjusted Gross Income (AGI) as reported on your federal tax return, and the total amount of your Direct Loan(s). To participate in the ICR Plan you must authorize the U.S. Internal Revenue Service (IRS) to inform the U.S. Department of Education (Department) 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 If you select the ICR Plan, you will be billed for only the
interest amount that accrues on your loan each month until you complete and return the required documentation. We cannot place you on ICR Plan until we receive your completed forms.

Independent Student
An independent student is at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse.
In-School Status
The status of a loan prior to entering the grace or repayment period.


Interest
A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a

Prepayment
A prepayment is an amount in excess of the amount due on a loan. If borrowers have more than one Direct Loan, they must specify which loan they are prepaying. Like all other Direct Loan payments, a prepayment first will be applied to any outstanding fees and charges, next to outstanding interest, and then to the principal balance of the loan(s). There is never a penalty for prepaying principal or interest on Direct Loan Program loans.

Principal Loan Balance Outstanding (principal balance)
The total principal amount outstanding on a borrower's Direct Loan(s). Principal balance will include the original amount(s) disbursed for the loan(s), any adjustments made to the loan disbursement amount, and any interest capitalized on the account(s).

Promissory Note
The binding legal document that borrowers sign when they obtain loans. Promissory notes define the conditions under which funds are provided and the terms under which borrowers agree to pay back the loan. Promissory notes include information about the interest rate and about deferment and cancellation provisions.

Reasonable and Affordable Payments
Rehabilitating a defaulted loan or making satisfactory payment arrangements requires borrowers to make "reasonable and affordable" payments. The holder of a Direct Loan or FFEL Program loan determines on a case-by-case basis what constitutes a reasonable and affordable payment on defaulted loans. Loan holders consider disposable income and such expenses as housing, utilities, food, medical costs, work related expenses, dependent care, and other Federal education loan debt. Borrowers are then provided with a written statement of

Extended Repayment Plan - To qualify for this plan, your Direct Loan balance must be greater than $30,000, and you will have up to 25 years to repay your loan(s). Plan options include:

Fixed Monthly Payment Option - You will pay a fixed amount of at least $50 each month for up to 25 years. Repayment under this plan will result in lower total interest paid when compared to graduated plans with similar terms.

Graduated Monthly Payment Option - You will pay a minimum payment amount of at least $50 or the amount of interest accrued monthly, whichever is greater, for up to 25 years. Your payments start out low and then increase every two years. Repayment under this plan may provide lower initial monthly payments, although the total interest paid may be greater when compared to plans with similar terms with fixed payments. This plan may be beneficial if your income is low now but is likely to steadily increase.

**Extended repayment terms are available to Direct Loan borrower with no outstanding principal or interest balances as of October 7, 1998 and with more than $30,000 in Direct Loans.

Income Contingent Repayment (ICR) Plan - payment amount is based on your income (and your spouse's income, if you are married), loan balance and family size, and can vary year-to-year for up to 25 years.

Satisfactory Repayment Arrangements
Borrowers in default on Direct Loan and FFEL Program loans who wish to consolidate their loans in a plan other than the Income Contingent Repayment (ICR) plan must have made satisfactory repayment arrangements with the loan holder(s).