Income-Sensitive Repayment (ISR)

Income-Sensitive Repayment (ISR)

Investopedia / Julie Bang

What Is Income-Sensitive Repayment?

Income-sensitive repayment (ISR) is a repayment method for loans serviced by lenders participating in the Federal Family Education Loan Program (FFELP). The ISR is intended to make it easier for borrowers with lower-paying jobs to afford their monthly loan payments. The ISR is an alternative to income-contingent repayment.

The monthly loan payment amount is based on a fixed percentage of the borrower's gross monthly income, between 4% and 25%. The monthly payment must be greater than or equal to the interest that the loan accrues.

FFEL program loans include three types of loans: FFEL Plus and Subsidized and Unsubsidized Federal Stafford Loans, however, the program was discontinued in July 2010. If you had the loan in 2010 or earlier, you can still qualify for income-sensitive repayment.

Key Takeaways

  • Income-sensitive repayment (ISR) is a repayment method for loans offered by lenders who participated in the now-defunct Federal Family Education Loan Program (FFELP).
  • Only loan holders who received their loans before or in July 2010 are eligible, so as of 2021, some of these loan holders are phasing out.
  • The ISR is intended to help individuals with lower-paying jobs afford to pay their loans, and the payment is based on a fixed percentage (4% and 25%) of the borrower's gross monthly income.
  • The monthly loan payment must be greater than or equal to the interest that the loan accrues to be in the program.

How Income-Sensitive Repayment Works

Income-sensitive repayment allows lower-earning borrowers to reduce their monthly payment amount, depending on the gross monthly income. 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.

Special Considerations

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.

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:

  1. Income-contingent repayment
  2. Income-based repayment
  3. Pay as you earn repayment
  4. 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.

Article Sources
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  1. Financial Counseling Association of America. "Income Sensitive Repayment." Accessed March 29, 2021.

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