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. Let’s look at the requirements, so you can decide 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.

Your income-sensitive payments can last up to 10 years but may change in years when your income does—you 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.

It’s important to note that FFEL loans aren’t eligible for Public Service Loan Forgiveness (PSLF), so if you want to be considered for that program, you’ll need to use a Direct Consolidation Loan to combine your FFEL loans and qualify for PSLF, if applicable.

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 the access to some of the other income-driven repayment options that 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

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

  • FFEL program loans aren’t eligible for PSLF

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. It can be difficult to get FFEL loan forgiveness, as they don’t qualify for PSLF.

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. Additionally, you’ll qualify for FFEL loan forgiveness under PSLF, although any payments you made toward your FFEL program loans won’t be included in the 120 qualifying payments you need to make in order to receive PSLF. 

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.

Carefully consider your situation and review your choices. Depending on the situation, your remaining loan balance, and other factors, it might be a better choice than the ISR plan for you to consolidate your FFEL loans under the Direct program, then take advantage of other options.