IBR vs. ICR: Which Income-Driven Repayment Plan Is Right for You?

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The language around student loans gets confusing fast, but some of the most perplexing terms have to do with income-driven repayment plans.

“Income-driven repayment plan” is an umbrella term for four federal student loan repayment options:

  1. Revised Pay As You Earn (REPAYE)
  2. Pay As You Earn (PAYE)
  3. Income-Based Repayment (IBR)
  4. Income-Contingent Repayment (ICR)

If you’re struggling to make your monthly payments and you have federal student loans, one of these plans could help. In this article, we’ll focus specifically on Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR).

Find out the similarities and differences of these programs, as well as how to decide which one is right for you.

IBR vs. ICR: How are they similar?

Income-Based Repayment and Income-Contingent Repayment are two income-driven plans for federal student loans. Both adjust your monthly payments based on your income, and both plans have annual requirements to recertify your income and family size.

IBR and ICR typically lower your monthly payments, but they also extend your loan repayment term to 20 or 25 years. If you still have a loan balance after that time, it will be forgiven. You won’t have to make any more payments, but you might have to pay income taxes on the forgiven balance.

Both plans are helpful if you need relief from your student loan payments. Though they share a lot of similarities, they also have some key differences in how they work and what types of loans qualify.

What’s unique about Income-Based Repayment?

IBR could be a better option for a lot of borrowers for four reasons:

1. Lower monthly payments

IBR typically lowers your monthly payment more than ICR does. It limits payments to 10 or 15 percent of your income, depending on the type of loan, whereas ICR caps them at 20 percent.

If you took out loans on or after July 1, 2014, IBR would lower your monthly payments to 10 percent of your discretionary income. If you took out loans before July 1, 2014, you’d pay 15 percent of your discretionary income.

2. Covers Direct and FFEL loans

The second reason many borrowers prefer IBR is that it covers both Direct Loans and Federal Family Education Loans (FFEL). Other income-driven plans such as ICR require you to consolidate FFEL Loans, a step you don’t have to take to get on IBR.

Federal loans for parents are not eligible for IBR, though they could be eligible for ICR.

3. Three years of interest benefits on subsidized loans

Depending on your loan type, IBR has a major advantage over ICR when it comes to student loan interest.

When IBR reduces your monthly payments, you might not pay enough to cover monthly accrued interest. If that’s the case and you have subsidized loans, the government will cover the difference between your payment and remaining interest for up to three consecutive years.

For unsubsidized loans, you still have to pay the interest that accrues. ICR has no such interest subsidy benefit for any loan type.

4. Payments will never exceed those of the 10-year Standard Repayment Plan

To qualify for IBR, you must prove your income is low relative to your debt. If your income goes up, your payments could increase, too. But they will never exceed the amount you’d pay on the Standard Repayment Plan.

Who should choose an IBR plan?

Because you pay a smaller percentage of your income with Income-Based Repayment than with Income-Contingent Repayment, IBR may be the superior choice for many student loan borrowers with financial need.

If one or more of these points describe you, you might benefit from choosing IBR over ICR:

  • You have Direct federal loans.
  • You have FFEL loans.
  • You don’t have any Parent PLUS loans.
  • You can demonstrate financial hardship.

You should also note that IBR forgives loans for “new borrowers” after 20 years. But if you took your loans out before July 1, 2014, you’ll have to wait 25 years for loan forgiveness.

What’s unique about Income-Contingent Repayment?

Income-Contingent Repayment has a few important differences from Income-Based Repayment. Here’s what you need to know:

1. No financial hardship requirement

You don’t need to demonstrate financial need to get on ICR. There’s no income requirement to get on the plan, but you will need to annually verify your income and family size to remain on it.

2. Two potential rules for monthly payments

ICR determines your monthly payments in one of two ways. For some borrowers, it caps payments at 20 percent of their discretionary income.

Alternatively, ICR could set your monthly payment equal to what you would pay on a 12-year repayment plan. If you don’t have great financial need, you might end up on this plan. A 12-year plan could offer some relief, but your monthly payment may not be that different from what you’d pay on the standard 10-year plan.

Your monthly payment will be set to the lesser of the two above options.

3. Your payments could exceed the Standard Repayment Plan

If your income increases over time, your monthly payments could be higher than what you’d pay on the 10-year plan. Unlike IBR, ICR doesn’t stop your monthly payments from increasing indefinitely along with your income.

4. Covers Parent PLUS loans

Another difference between IBR and ICR has to do with Parent PLUS loans. ICR covers any and all Parent PLUS loans, as long as they’re consolidated through a Direct Consolidation Loan first. This is the only income-driven repayment plan that will cover federal Parent PLUS loans.

Who should choose an ICR plan?

ICR doesn’t typically lower monthly payments as much as IBR, but this difference can be a positive one if you want to save money on interest. If you can pay off your loans sooner than 25 years, you might prefer to make higher monthly payments. The more you pay now, the less you’ll pay in interest in the long run.

Secondly, ICR is useful for borrowers with Parent PLUS loans. As mentioned above, IBR does not cover Parent PLUS loans.

And finally, you must be comfortable making payments based on your income. If your income rises over time, your payments could end up higher than they would be on the standard 10-year plan.

In a nutshell, you should consider ICR if:

  • You have Parent PLUS loans.
  • You can’t demonstrate financial hardship.
  • You don’t mind payments increasing with your income, even beyond what they would be on the 10-year plan.

Another option: student loan refinancing

Income-driven repayment plans can help you manage your student loans, but they also have a few major drawbacks. For one, they extend your repayment term by over a decade. You’ll be burdened with student loan payments for many years, significantly increasing the amount of interest you pay, too.

Furthermore, income-driven plans only apply to federal student loans. Since the federal student loan limit for undergrads is $31,000, many people also have a good deal of private student loan debt.

Refinancing your student loans could be useful if you have both federal and private student debt. It involves taking out one new loan with a private lender to repay your current student debt.

The new loan should have better terms, including a lower monthly payment and reduced interest rate. For the best terms, you need a steady income and a good credit score. If you qualify, student loan refinancing could help you better manage your student loan payments.

What you need to remember about IBR vs. ICR

If you’re overwhelmed by your student loan bills, explore options that can help. Income-driven repayment plans ease the burden and free up more of your monthly income.

It’s easy to get confused when sifting through the different student loan repayment plans. But by taking the time to compare, you can hone in on the option that’s best for you.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.

Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 7.979% APR (with AutoPay). Variable rates from 2.470% APR to 6.990% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.470% APR assumes current 1 month LIBOR rate of 2.30% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.

All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.


6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of November 1, 2018, the one-month LIBOR rate is 2.29%. Variable interest rates range from 2.79%-8.39% (2.79%-8.39% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled. Applicants with an Associate’s degree or with no degree must have made at least 12 qualifying payments after leaving school. Qualifying payments are the most recent on time and consecutive payments of principal and interest on the loans being refinanced. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a cosigner who is a U.S. citizen or permanent resident. The cosigner (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a cosigner will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.

2.47% – 6.99%3Undergrad
& Graduate

Visit SoFi

2.47% – 6.30%1Undergrad
& Graduate

Visit Earnest

2.51% – 8.09%4Undergrad
& Graduate

Visit Lendkey

3.02% – 6.44%2Undergrad
& Graduate

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2.69% – 7.21%5Undergrad
& Graduate

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2.79% – 8.39%6Undergrad
& Graduate

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.