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July 17, 2012

New Student Loan Regulations Introduce ICR-A

The Department of Education today published proposed regulations implementing a better, faster, and stronger repayment option for student loan borrowers. 

Formerly known as President Obama’s Pay As You Earn initiative, it shall now be known by the absurdly non-descriptive name of ICR-A.  [sigh]   In spite of the stupid name, the new repayment option ROCKS (if you can get it…)

There is fine print of course, but here’s the gist:

  • Annual payments are capped at 10 percent of “discretionary income” (IBR’s cap is 15%).
  • Remaining loan balance is forgiven after 20 years of qualifying payments (IBR after 25 years).

Otherwise, ICR-A looks a lot like IBR:

  • Borrowers must demonstrate what’s known as a “partial financial hardship”.
  • Unpaid accrued interest is capitalized only if a borrower no longer has a partial financial hardship, or chooses to leave the plan.
  • Unpaid accrued interest is subsidized for the first three years in repayment.

But ICR-A will only be available for people who:

  1. got their first student loan on or after October 1, 2007, AND
  2. got a student loan on or after October 1, 2011 (one loan can count for both requirements).

Loads more from me on the nitty gritty in the coming days and months.  I kind of enjoy getting 350 pages of new student loan law to pick through; is that wrong?


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