Income-Sensitive Repayment Plan: How It Works and Who Qualifies

• The Income-Sensitive Repayment Plan can offer lower monthly payments than other income-driven repayment plans, which calculate payments based on your income.

• The ISR plan lasts for up to 10 years and is only open to FFEL Loan borrowers.

• If you need a long-term low payment amount, consider consolidating your FFEL Loans into a Direct Consolidation Loan and applying for the SAVE or IBR plan.

The Income-Sensitive Repayment Plan (ISR) is a federal student loan plan that adjusts your monthly payments based on your gross income. It’s designed to last up to 10 years, making it helpful for student loan borrowers dealing with temporary financial difficulties who need lower payments. But this type of plan has significant limitations:

• Repayment Length: Limited to 10 years; after that, you must switch plans.

• Monthly Payments: Payments are 4% to 25% of your gross income (before taxes).

• Loan Type: Available only for FFEL loans.

Direct Loans aren’t eligible for this plan and ISR payments do not count toward loan forgiveness programs like Public Service Loan Forgiveness and 20 to 25 year forgiveness under IDR plans.

If you’re looking for flexibility in your payments, ISR could be a good fit for you—though it’s not meant to be a long-term solution.

You can find more information ahead on how to qualify, how your payments are calculated, and how ISR compares to other repayment plans. This can help you determine whether it’s the right option for your situation.

Related:

• How Do I Change My Student Loan Repayment Plan?

• What Repayment Plans Qualify for Public Service Loan Forgiveness (PSLF)?

Payments under ISR are based on your adjusted gross income, which is your income before taxes and deductions. Your loan servicer calculates the payment amount, which typically ranges between 4% and 25% of your income.

Because the payments are based on gross income, ISR differs from other income-driven repayment plans that base payments on discretionary income (after living expenses). Related: How Do Student Loans Calculate Discretionary Income?

Key Details:

• Annual Review: Each year, you must reapply for ISR by submitting proof of your income, such as tax returns or pay stubs. Your loan servicer will then recalculate your payment based on any changes to your income.

• Loan Servicer Discretion: Your exact payment amount is determined by your loan servicer, which means that two borrowers with the same income but different lenders may have different payment amounts.

ISR is particularly useful for borrowers who face short-term financial challenges, but note that using this plan could lead to higher overall interest costs.

Smaller payments mean it will take longer to pay off the loan, potentially increasing the total amount paid over time.

In addition to understanding how this repayment plan works, you can also find helpful tips for reducing your student loan debt. Take a look at this guide we’ve created for you: How to Reduce Your Student Loan Debt.

Only student loan borrowers from the FFEL program qualify for the Income-Sensitive Repayment plan, which is not available for Direct Loans.

There are no strict income thresholds to qualify, but your monthly payment amount must exceed 20% of your income for this plan to be viable. You must also submit proof of your income each year to stay on the plan.

Here are the key eligibility requirements:

• Loan Type: Only FFEL loans, including Subsidized and Unsubsidized Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans.

• Income-Based Payments: Borrowers whose payment exceeds 20% of their income will most likely benefit from this plan.

• Loan Standing: You must be in good standing with your loan. Borrowers in default are not eligible for ISR. For help, read this guide on How to Get Student Loans Out of Default.

Pros

• Flexible Payments: Your monthly loan payments are based on your income, making it easier to afford them when money is tight. This flexibility sets ISR apart from a standard student loan repayment plan.

• Helps Prevent Default: Lower payments can help reduce the chances of needing forbearance or deferment, which might lead to increased student loan debt in the long run.

• Short-Term Relief: If you’re facing financial struggles, this plan gives you lower payments to help you manage better for a while.

Cons

• Longer Repayment: Smaller payments may take longer to pay off your loan, keeping you in debt for more years.

• More Interest: Because payments are smaller, it could take longer to repay the loan, leading to higher overall student loan debt and interest rates.

• Only for FFEL Loans: This plan is only available if you have FFEL loans. If you have other types of loans, this plan won’t be an option.

Both aim to make student loan payments more affordable, but they work in different ways and apply to different types of loans.

Here’s what sets them apart:

• Eligibility: ISR is available only to borrowers with federal student loans from the FFEL program. IDR plans, such as Saving On A Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment Plan (IBR), or Income-contingent Repayment (ICR), are generally available for Direct Loans and, in some cases, for FFEL loans (if they become a Direct Consolidation Loan).

• Payment Calculation: ISR payments are based on gross income (before taxes), while IDR plans calculate payments based on discretionary income (after basic living expenses). As a result, IDR payments are often lower than ISR payments.

• Repayment Period: ISR typically lasts up to 10 years, but you can only be on the plan for five consecutive years. IDR plans extend the repayment period to 20 or 25 years.

No, the Income-Sensitive Repayment Plan does not offer loan forgiveness. This plan helps lower your payments based on your income but doesn’t forgive any remaining loan balance after a certain number of years.

If you’re looking for a loan forgiveness plan, you might want to consider an Income-Driven plan. These plans can forgive your loan after 20 to 25 years of payments.

The ISR plan is designed to make your payments more manageable, but it won’t erase any of your remaining debt.

Related:

• Can You Get Student Loan Forgiveness If You Are in Default?

• Student Loan Forgiveness After 20 Years

1. Confirm Your Eligibility: Make sure you have a loan from the FFEL Program. The ISR plan is only available for FFEL loans, so check with your loan servicer or Federal Student Aid to verify your eligibility.

2. Contact Your Loan Servicer: Once you’ve confirmed eligibility, reach out to your loan servicer. They will provide you with the forms and details on how to apply. You can find their contact information on your loan statement or by logging into your account.

3. Complete the Application and Submit Income Proof: Fill out the application form provided by your loan servicer. Include proof of your current income, such as recent pay stubs, tax returns, or other income documents if you’re self-employed or have fluctuating earnings.

4. Submit and Wait for Approval: After reviewing your application and confirming all necessary documents are included, submit them to your loan servicer. They will review it and let you know your new payment amount based on your income.

5. Begin Your New Payment Schedule: Once approved, your new payment plan will start based on the calculated amount. Be sure to make your payments on time according to this new schedule.

The ISR plan may be a good option when your income makes it difficult to keep up with regular student loan payments. Here are some situations where this plan might be helpful:

Your Income is Low or Changes Frequently

For those in professions with variable income—such as freelance writers, gig workers, or seasonal employees—the ISR adjusts your payments based on what you currently earn.

For example, if you’re a freelance graphic designer whose income fluctuates monthly, the ISR can help by aligning your payments with your earnings, ensuring they remain affordable during slower months. This flexibility prevents financial strain when your income is unpredictable.

You Need Temporary Relief

If you’re affected by short-term financial challenges—such as teachers facing a pay cut due to budget constraints or retail workers whose hours have been reduced—the ISR provides temporary relief.

In such cases, the plan can reduce your payments for a limited time to help you stabilize your finances. But remember that while the reduced payments offer breathing room, they may extend your repayment period and increase the overall interest you pay.

This makes ISR a useful stopgap during tough times but not a long-term repayment solution.

You’re Trying to Avoid Default

Borrowers with low income may find it difficult to keep up with standard student loan payments.

If you’re at risk of falling behind on payments, the ISR can help by lowering your payments to match your income, preventing default.

Related: Is It Too Late to Address a Student Loan Defaulted 20 Years Ago?

You Have FFEL Loans and Limited Options

If you’re a government employee or a nurse with FFEL loans who don’t qualify for other income-driven repayment plans, ISR may be one of your only options for reducing your payments.

This plan is only available to borrowers with FFEL loans, so if you’re not eligible for plans like the SAVE plan, IBR plan, or PAYE, the ISR offers a way to make your payments more manageable based on your income.

• Standard Repayment Plan: Fixed monthly payments over 10 years. Learn more about the Standard Repayment Plan. 

• Extended Repayment Plan: Spread payments over 25 years, lower monthly payments, and offer quick relief. Learn more about the Extended Repayment Plan.

• Graduated Repayment Plan: Payments start low and increase every two years, with a 10-year repayment term. Learn more about the Graduated Repayment Plan.

• Income-Driven Repayment Plans: Payments are based on your income and family size, with potential loan forgiveness after 20-25 years. Learn more about Income-Driven Repayment Plans.

The Income-Sensitive Repayment Plan adjusts payments based on gross income, offering relief for FFEL loan borrowers for up to 10 years. Payments range from 4% to 25% of income but may increase total interest over time. This plan does not qualify for loan forgiveness.

To qualify, borrowers must have FFEL loans in good standing. Direct Loans are only eligible through consolidation. For a long-term solution, consider an Income-Driven Repayment Plan, which caps payments based on income and offers loan forgiveness after 20 to 25 years.

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