Income Sensitive Repayment: Learn All About It

Read more about Income Sensitive Repayment. Understand which loans are eligible, the benefits and the downsides of ISR.

Updated by Vidish S on 17th June 2020

Most of the Student Loan Borrowers haven’t heard of Income Sensitive Repayment. This is not a well-known student loan repayment option. It can provide you with much-needed relief if you are struggling to keep up with your federal loan payments. Although it should be kept in mind that ISR applies only to loans issued under the Federal Family Education Loan(FFEL) Program, and while it offers some benefits, it also has some drawbacks you should be aware of.

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Table of contents

What is Income Sensitive Repayment?

Your monthly student loan bills can be reduced if they are overwhelming you, by the use of the Income-Sensitive Repayment Plan. This plan can cap your monthly loan payments, anywhere from 4% all the way up to 25% of your gross monthly income.

What makes ISR unique is the fact that you can choose your monthly repayment amount, as long as it is equal to or more than the interest accruing every month.

Although there is one limitation here, ISR is only available for five years and as it doesn’t extend your repayment period, you will probably end up with a bigger monthly bill later on an will need to increase your payments later to pay off your debt by the standard 10-year deadline.

Lasting for only five years, ISR is typically best for borrowers who need short-term relief. With ISR, you will pay less right now, but considerably more later on in the future to pay off your debt in the usual repayment term of your loan.

Which Loans are Eligible

One of the reasons for the overshadowing of ISR by other income-driven repayment plans is its limited scope as it only applies to loans made under the FFEL program.

FFEL program loans:

  • FFEL Consolidation Loans

  • FFEL PLUS Loans

  • Subsidized Federal Stafford Loans

  • Unsubsidized Federal Stafford Loans

Who is the Income-Sensitive Repayment Plan not for?

The Income-Sensitive Repayment Plan is not a common option for repayment for most student loan borrowers. It also often confused with an income-driven repayment plan. Income- sensitive Repayment plan is basically an alternative to income-contingent repayment for loans serviced by lenders in the Federal Family Education Loan Program (FFELP), designed to make it easier for the borrowers with a lower-paying job to make their monthly loan payments. However, these are very different payment methods.

Here are some reasons  listed which will give you an idea that why a student loan borrower might want to choose a different repayment plan:

1-Student loan borrowers that have a high income and low family size

2-Your current monthly payment does not exceed 10% of your income

3-Anyone that can comfortably make their current Standard monthly payment

4-Student loan borrowers that have William D Ford Direct Loans

How long will I be in the Income-Sensitive Repayment Plan?

Generally, the repayment period for the income-sensitive repayment plan is 10 years and depend upon the annual income as it will determine the amount of your payment each year. if you pay all the 120 payments on time then this is the easiest and quickest way to repay your student loans in this plan but it depends upon your financial situation. If later on, you think that an income-sensitive repayment plan is not the right choice for you maybe because of the uncertain financial crisis, you can choose to take yourself out of the plan.

Income sensitive repayment plan is an alternative of Income Contingent Repayment Plan as they make it easier for those borrowers who are in a less paying job and have to do monthly loan payment but note that income-sensitive repayment plan is not part of income-driven repayment plan offered by the Department of Education.

The monthly payment in the Income-Sensitive Repayment Plan will change each year based on your annual income that how much you earn and how much you can pay.. If the income increases or decreases, the monthly payment will also change respectively.

In case of any doubt on the monthly payment, you can consult your loan servicer as in some situation income-driven repayment plan is considered more helpful than income-sensitive repayment plan thus it is better to first check and analyze all the option and then see what plan works best for you and your family.

Benefits of Income Sensitive Repayments

One of the greatest benefits provided by the Income Sensitive Repayment plan is that it applies to FFEL loans. Most of the other income-driven plans exclude FFEL loans unless you consolidate them first. Income Sensitive Repayment also has a big appeal among borrowers who want a short term relief while maintaining a 10-year deadline for paying off their loans. Income Sensitive Payments plans are good for those borrowers who need relief now but expect their income to increase in the future.

Drawbacks of Income Sensitive Repayments

Income Sensitive Repayment plans might not be so useful for loanees who require long term relief. If a longer repayment term is what you require, then researching other income-driven plans might be a good move. Income Sensitive Repayment plan does not offer loan forgiveness either, whereas other income-driven repayment plans may provide loan forgiveness after 20 or 25 years of repayment.

Income Sensitive Repayment can also cause your interest to build up as with reduced payments, you could end up paying more interest on your FFEL loans overall.

ISR details may also vary slightly among different lenders.

Other Alternatives

1. Repaye plan: PAYE had many qualifications to pass which were very hard, hence REPAYE plan was introduced with similar benefits

2. Paye plan: This is introduced to release the hardships of borrowers taking student loans. Repayments of only 10 % of the discretionary income were to be paid and also after consecutive payments for 20 years you are eligible for a loan forgiveness program.

3. Income-based repayment plan. : This plan is available for federal student loans from 2009. This plan usually helped borrowers repay only 10% of discretionary income. Its calculated considering family size, residence, and income

4. Income contingent repayment plan. : This plan usually helped borrowers repay up to 20% of discretionary income. Borrowers working in public service found this plan beneficial. Its calculated considering family size, residence, and income


When to choose ISR

ISR does not provide loan forgiveness or longer repayment time. But if federal family education loan does not help. You can apply for Income sensitive repayment plan. This can help you pay lesser payments for 5 years. So if you feel confident to finish the repayment process by 5 years, choosing this plan is ideal. And if the repayment still remains you can switch back to other options and start paying the loans.
This plan is best if you can pay your loans in a 10-year repayment plan.

Concluding Thoughts

As you might be aware by now, Income Sensitive Repayment plans have their own benefits as well as downsides. If you require help right now, ISR may be one option to look at. You can also refinance your loans if you think ISR may not be the best option for you. Check out the Best Companies To Refinance Your Student Loans to learn more about the lenders who offer to refinance your current loans and which might be the best fit for you. As always, do your due research before going ahead with any financial decision.