2026 Updates to Income-Contingent Student Loan Repayment Formula
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This notice updates the formula used to calculate monthly payments under the federal Income-Contingent Repayment plan for Direct Loan borrowers in the 2026-2027 plan year. Borrowers who enter the ICR plan or have their payment recalculated between July 1, 2026, and June 30, 2027, will have payments based on updated income percentage factors. The change matters for borrowers, loan servicers, and financial aid advisers because it affects how monthly payment amounts are calculated using income, family size, loan balance, and interest rate.
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Key Changes
- Updates the income percentage factors used in the ICR payment formula for the 2026-2027 year
- Applies to borrowers entering ICR or having payments recalculated from July 1, 2026, through June 30, 2027
- Confirms ICR payments remain based on the lower of a 12-year adjusted repayment amount or 20 percent of discretionary income
Obligations
What this law requires
Apply the updated income percentage factors when calculating monthly ICR payment amounts for any Direct Loan borrower who enters the ICR plan or has their ICR monthly payment recalculated between July 1, 2026, and June 30, 2027.
Calculate ICR monthly payments using the lesser of: the 12-year fixed repayment amount multiplied by the applicable income percentage factor, or 20 percent of the borrower’s discretionary income.
Base ICR monthly payment calculations on the borrower’s Adjusted Gross Income, family size, loan amount, and the interest rate applicable to each borrower loan.