Guide to Income-Sensitive Repayment Plans

Q: Do income-sensitive repayment plans get adjusted every year?

The income-sensitive repayment plan requires that you submit income information every year and may adjust your student loan payments if your income changes.

Q: How many years do you have to pay student loans under an income-sensitive repayment plan?

You can typically only stay on an income-sensitive plan for up to 10 years, but that doesn’t mean you’re expected to pay off your full balance in that time. If you still owe a balance, you’ll need to switch to an alternative repayment plan.

Q: Are income-sensitive repayment plans generally a good idea?

The income-sensitive repayment plan might be a good idea if you’re struggling to afford payments on your FFEL loans. However, it could be worth exploring alternative income-driven repayment options to determine the best plan for you.

Guide to Income-Sensitive Repayment Plans

Rebecca SafierUpdated July 31, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

The income-sensitive repayment plan can help make payments on Federal Family Education Loans (FFEL) more affordable for some student-loan holders. It can adjust your monthly payments in accordance with your income for up to five years. Recent borrowers probably won’t be eligible, however, since this plan is only for loans from the FFEL program, which stopped issuing new loans in July 2010. But if you borrowed FFEL loans before that time, income-sensitive repayment could be worth exploring. Read on to learn:

What is an income-sensitive repayment plan?
How do ISR plans work?
Which loans are eligible for ISR plans?
What are alternatives to income-sensitive repayment?

What Is an Income-Sensitive Repayment (ISR) Plan?

The income-sensitive repayment plan is a type of income-driven plan for FFEL loans. The FFEL loan program closed in July 2010 and was replaced by today’s Direct loan program. An income-sensitive plan is typically for those who are earning a lower income and have a high debt-to-income ratio. This plan adjusts payments on your student loans in accordance with your income, though payment obligations will vary by borrower. Your loan servicer determines your payment amount, and it can be anywhere from 4% to 25% of your discretionary income.

How Do ISR Plans Work?

If you feel your student loan payments are too high, you can request an income-sensitive plan from your loan servicer. You’ll need to apply every year and provide proof of income with tax returns and W-2s in order to qualify. What’s more, you can only stay on an income-sensitive plan for up to 10 years. After that time, you’ll have to switch back to the standard plan or apply for an alternative repayment plan. You can get FFEL loans on other income-driven repayment plans, but you may need to consolidate them first with a Direct consolidation loan. Recommended: How Long Does It Take to Pay Off Student Loans?

Pros and Cons of Income-Sensitive Repayment Plans

Now that you understand who qualifies for these plans and how they work, here’s a look at the advantages and disadvantages of ISR plans.

The main benefit of an income-sensitive repayment plan is that it can reduce monthly payments for FFEL borrowers. Depending on your loan servicer’s determination, your bills could be as low as 4% of your discretionary income.
On the flip side, your monthly payment could go up to 25% of your discretionary income. Because the terms can be so variable, you won’t know exactly what to expect until you speak with your loan servicer.
Direct loans are not eligible for income-sensitive repayment, and the plan is typically only available for up to 10-year terms. While other income-driven repayment plans have the potential to end in loan forgiveness, income-sensitive repayment does not offer this option.

Below, a chart that shares these pros and cons:

Pros	Cons
Can reduce monthly payments	Only available for loans taken out prior to July 2010 and typically only last up to 10 years.
FFEL loans are eligible	Direct loans are not eligible
Payment may be as low as 4% of discretionary income	Payment could be as high as 25% of discretionary income

Which Loans Are Eligible for Income-Sensitive Repayment Plans?

Only loans from the FFEL program are eligible for income-sensitive repayment. These include:

Subsidized Stafford FFEL loans
Unsubsidized Stafford FFEL loans
FFEL PLUS loans
FFEL consolidation loans.

Direct loans and Perkins loans are not eligible. Also, timing matters. If you borrowed your loans after July 2010, they’re probably not eligible for income-sensitive student loan repayment plans. Recommended: How to Pay Off Student Loans

Income-Driven Repayment vs Income-Sensitive Repayment

Given the very specific qualifications for ISR, you may wonder what other options exist. If you owe Direct loans, you have alternatives for income-driven repayment. There are four plans to choose from:

Saving on a Valuable Education (SAVE) Plan, which replaces the Revised Pay As You Earn (REPAYE) Plan
Pay As You Earn (PAYE)
Income-Contingent Repayment (ICR)
Income-Based Repayment (IBR)

You may also opt for one of these plans if you owe FFEL loans, but you’ll likely need to consolidate them first. While the income-sensitive plan has somewhat complicated rules, these other plans are more straightforward.Private student loans are not eligible for any federal repayment options, including IDR plans. Depending on your income and family size, all four IDR plans may offer a lower monthly payment compared with the Standard Repayment Plan.If you still have a balance at the end of your IDR term, it could be forgiven. These four plans are also the only federal repayment plans that qualify for the Public Service Loan Forgiveness (PSLF) program. Here’s a look at how these plans stack up in chart form:

	Income-sensitive repayment	Other income-driven repayment plans
Monthly payment	4% to 25% of discretionary income	5%, 10%, 15%, or 20% of discretionary income
Terms	Up to 10 years	Typically 20 or 25 years
Qualifying loans	FFEL loans, which stopped being issued in July 2010	Direct loans. FFEL and Perkins loans typically qualify if you consolidate them first
Could end in loan forgiveness?	No	Yes
Qualifies for PSLF?	No	Yes

Alternatives to Income-Sensitive Repayment

While the income-sensitive repayment plan might be useful for FFEL borrowers who are struggling to afford their student loan payments, it’s not your only option for managing student loans. Here are some alternatives worth exploring.

Student Loan Refinancing

Student loan refinancing has the potential to make your student loans more affordable. Here’s what student loan refinancing is: It involves exchanging one or more of your current loans for a new loan from a private lender. Depending on your credit and other financial credentials, you could qualify for a better rate than you have now. Lowering your interest rate even a small amount can reduce your monthly payment and long-term interest charges. Plus, you can choose new repayment terms that better fit your budget and repayment timeline. This can be worth investigating if you are refinancing student loans with a low income. There are both advantages and disadvantages of student loan refinancing, though. For one, you’ll need strong credit (or a creditworthy cosigner) to qualify for good rates. And second, refinancing federal loans means sacrificing federal protections, including income-driven repayment plans. If you want to keep your federal loans eligible for federal benefits, it wouldn’t make sense to refinance them. If you can lower the rate on private student loans through refinancing, however, it could be a savvy strategy.

Income-Driven Repayment Plans

You can also explore the four IDR plans mentioned earlier. You can stay on these plans for the duration of repayment, but you typically have to certify them on an annual basis and continue to qualify based on your income and family size. If you still owe a balance at the end of your IDR term, it could be forgiven.Recommended: Consolidating Student Loans: What You Need to Know

Student Loan Forgiveness

Depending on your profession, you could qualify for a student loan forgiveness program. The PSLF program, for instance, forgives student loans after 10 years of public service and 120 qualifying payments on an income-driven repayment plan. Teacher Loan Forgiveness provides up to $17,500 in loan forgiveness to qualifying teachers who teach for five consecutive years. Explore your options for loan forgiveness to see if you could qualify to get part or all of your student loan balance wiped away.

Student Loan Refinancing Rates

If you’ve weighed the refinancing pros and cons (such as losing access to certain federal protections) and decided to move forward, your first step is to shop around with multiple lenders. By comparing offers, you can find a refinancing offer with the best rates and terms for you. Lantern can show you competitive student loan refinancing offers from leading lenders, quickly and conveniently. This intel can help you see which options might best help you improve your cash flow and meet your financial goals. Ready to refinance? Lantern can make it so easy.

Frequently Asked Questions

Do income-sensitive repayment plans get adjusted every year?

How many years do you have to pay student loans under an income-sensitive repayment plan?

Are income-sensitive repayment plans generally a good idea?

Photo credit: iStock/PeopleImages

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About the Author

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).

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