What Is an Income-Sensitive Repayment Plan for Student Loans?

Could an income-sensitive repayment (ISR) plan help your finances?

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Making student loan repayments when your income is low can feel overwhelming. If you have older loans from the Federal Family Education Loan (FFEL) program, there are a number of repayment options, including the income-sensitive repayment (ISR) plan, which focuses on these now-discontinued loans.

If you’re struggling to make ends meet and you could use some FFEL student loan relief, the ISR repayment plan might work for you. Take a look at the requirements to find out whether this approach is right for you.

What Is the Income-Sensitive Repayment Plan?

When considering student loan repayment, there’s a good chance you’ve heard of various income-driven plans, aimed mostly at federal student loans in the Direct program

Income-sensitive repayment, or ISR, is designed specifically for those who have loans under the FFEL program, which stopped new lending as of July 1, 2010. 

With an ISR repayment plan, your monthly obligation is based on your income, so what’s owed can increase or decrease based on how much you make each year. Additionally, the loan term only lasts for a maximum of 10 years, with your total balance paid in full within 15 years.

How the ISR Payment Plan Works

With income-sensitive repayment, your lender or loan servicer determines how much you’ll pay each month. The formula used to figure out the payment depends on your lender or servicer, so find out about your options.

Important

Your income-sensitive payments can last up to 10 years but may change in years when your income does. You have to certify what you’re earning each year. 

The program is designed so that your loan will be repaid in full within 15 years, so you could potentially see higher monthly payments toward the end of the program.

Who Can Qualify for ISR?

If you are still paying on FFEL program student loans, you need a low-income loan repayment plan, and you don’t have Direct loans (and access to the income-driven repayment options those offer), ISR might be able to help. Check with your lender or loan servicer to find out how to qualify for the program, because formulas for determining your payments can vary.

The loan types that qualify for ISR are:

  • Federal Stafford loans (subsidized and unsubsidized)
  • FFEL Plus loans
  • FFEL Consolidation loans

Note

Direct loans made under the current program aren’t eligible for ISR. Instead, there are income-driven repayment plans available for borrowers with Direct loans.

Pros and Cons of the Income-Sensitive Repayment Plan

Pros
  • Reduces your monthly payment to something more manageable

  • Allows income-sensitive payments for the older FFEL program, for those who don’t qualify for other income-driven plans.

Cons
  • Likely to cost more over time than you would pay with standard 10-year repayment

  • Does not provide loan forgiveness

Other Income-Driven Repayment Options

In addition to income-sensitive repayment, there are other options for low-income student loan repayment help. First, it’s important to note that, of the newer income-driven repayment plans, only income-based repayment (IBR) allows you to include FFEL loans. In fact, that might be a better choice than an ISR repayment plan, because IBR comes with loan forgiveness.

If you have older FFEL loans, you can gain access to other income-driven repayment options by consolidating your FFEL program loans into the Direct Loan program. Once you do this, you can be eligible for income-contingent, Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) programs.

Note

Under the American Rescue Plan Act, if you qualify for loan forgiveness, you won't have to pay taxes on the forgiven amount. Forgiven student loan debt is tax-free through 2025.

Changes to the Public Service Loan Forgiveness Program

On October 6, 2021, the Department of Education announced transformational changes and expanded eligibility for the Public Service Loan Forgiveness (PSLF) program. Previously, FFEL loans did not qualify for forgiveness, but the new rules could provide you with a waiver.

The new rules also waive restrictions on the type of repayment plan and the requirement that you make full payments and that they were on time. If you made more than 120 qualifying payments, you may have those additional payments refunded.

If you are or were a military service member or federal employee, the program will automatically provide credit toward PSLF using federal data matches. There are also plans to review past denied PSLF applications. This will give you the ability to have your PSLF determinations reconsidered.

Find out more about getting a waiver for the PSLF program.

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