Income Sensitive Repayment

Key Takeaways

• Income-sensitive repayment (ISR) helps borrowers with FFELP loans adjust payments based on income.
• Monthly payments are a fixed percentage of gross income, between 4% and 25%.
• ISR is only available for loans issued before July 2010.
• Borrowers must apply annually and provide tax returns and W-2s.
• FFELP ended in 2010; newer loans require different income-based repayment plans.

What Is Income-Sensitive Repayment?

Income-sensitive repayment (ISR) is a repayment option for Federal Family Education Loan Program (FFELP) loans that bases monthly payments on a borrower's income to help make payments more manageable. Although FFELP ended in 2010, borrowers with pre-2010 loans can still use ISR by applying each year and verifying income.

How Income-Sensitive Repayment Works

Income-sensitive repayment allows lower-earning borrowers to reduce their monthly payment amount, depending on the gross monthly income.1 This method of repayment increases the total amount of interest that will be paid on loan. Borrowers must apply each year to be eligible for ISR and provide a copy of their tax returns and W-2s.

Important Considerations for Eligibility

Not all student loans are eligible for income-sensitive repayment. Only loans under FFELP are available for this exceptional assistance. If you take it, this option is only available for five years, and you are still responsible for paying back your loans. However, you might be able to speak to your loan service provider (a lender participating in FFELP) and see if you can move to another type of program.

Important

The Federal Family Education Loan Program (FFELP) no longer exists as of July 2010, but it is possible to find other student loan income-based repayment plans.

Here's the catch: remember FFELP ended in July 2010, and if your loans were issued after that date, you don't qualify for this program. However, if your loans were issued in 2010 or before that date, you might be eligible. As of 2021, many years have gone by since this program was active in the student loan world.

There are other payment plans based on income and given that FFELP is no longer an option for students who went to school past 2010, they are most certainly worth looking into if you need a new payment plan. The four income-drive payment plans are as follows:

Income-contingent repayment

Income-based repayment

Pay as you earn repayment

Revised pay as you earn repayment.

However, in order to qualify to apply for one of these programs, you must take out a direct consolidation loan and consolidate your FFEL loans into it.