Have you borrowed a federal student loan under the Federal Family Education Loan (FFEL) program? Is your loan not eligible for student loan forgiveness? If so, the Income-Sensitive Repayment plan is a form of income-driven repayment plan available to you.
Below we answer all of the most common questions about Income-Sensitive Repayment so that you can make a more informed decision about whether or not it is right for you.
What is the Income-Sensitive Repayment Plan?
The Income-Sensitive Repayment plan is a form of income-driven repayment specifically designed for those who have borrowed loans under the Federal Family Education Loan (FFEL) program.
Because these loans have been made by private lenders, your exact payment amount is determined by your specific lender depending on your income. You can typically opt into the loan for a total of five years before you must enroll in a different repayment plan, such as Standard or Graduated Repayment.
Income-Sensitive Repayment is not a popular repayment option for most borrowers, and you will only be eligible if your monthly payments are greater than 20 percent of your discretionary income.
What types of loans are eligible for the Income-Sensitive Repayment Plan?
Income-Sensitive Repayment is only available for borrowers of FFEL Program Loans, which are not otherwise eligible for forgiveness under the Public Student Loan Forgiveness (PSLF) Program. This includes:
- Subsidized and Unsubsidized Federal Stafford Loans
- FFEL PLUS Loans
- FFEL Consolidation Loans
In order to qualify for this repayment plan, your total monthly payments must be greater than 20 percent of your discretionary income.
How long will repayment last?
If you opt into Income-Sensitive Repayment, you will typically be eligible for these reduced payments for five years. After five years have passed, your lender will typically require you to opt into either Standard or Graduated Repayment, which adds another 10 years to your repayment time frame. This means that Income-Sensitive Repayment can last for a total of 15 years. This does not include any periods of deferment or forbearance.
You must reapply for this payment plan each year you choose to pursue it.
How much will I pay?
Each individual lender is allowed to have their own formula for calculating loan payments under Income-Sensitive Repayment. Depending on your lender, payments may be capped at anywhere from four percent to 25 percent of your gross monthly income. After five years of repayment under ISR, you will revert to either Standard Repayment or Graduated Repayment.
Because of the lower monthly payments and extended repayment term, you will ultimately pay more in interest under Income-Sensitive Repayment than you would under either Standard or Graduated Repayment.
That being said, you can always make additional payments in order to pay off your student loans faster, even under Income-Sensitive Repayment. This can help you save money in the form of interest, and free you from your debt faster.
Can my loan be forgiven?
No, student loans repaid under Income-Sensitive Repayment are by definition not eligible for forgiveness under the Public Student Loan Forgiveness (PSLF) Program.
Pros and Cons of Income-Sensitive Repayment
Pros of Income-Sensitive Repayment:
- Because payments are linked to your income, if your income decreases for whatever reason, your payments will decrease as well
Cons of Income-Sensitive Repayment:
- Each lender is allowed to calculate monthly payment amounts according to their own formula
- You must have high debt and low income to qualify
- Due to a longer repayment timeline, you will pay more in interest compared to either Standard or Graduated Repayment
- If your income increases, your payment amounts will increase as well
- Only available for five years before reverting to Standard or Graduated Repayment
- No forgiveness options
How to Apply for Income-Sensitive Repayment
If you would like to opt into Income-Sensitive Repayment, all you need to do is contact your student loan servicer. They will help you understand whether or not your loans are eligible for this repayment plan, and can answer any questions you may have.
Alternatives to the Income-Sensitive Repayment Plan
Not sure whether or not Income-Sensitive Repayment is the right repayment plan for you? You have a number of other options to choose from. Depending on the specific types of loans that you have borrowed and your income, you may be eligible for:
- Standard Repayment
- Graduated Repayment
- Extended Repayment
- Revised Pay as You Earn Repayment Plan (REPAYE)
- Pay as You Earn Repayment Plan (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)