Consolidate FFEL and Stafford student loans into a single, simplified repayment plan that works for your budget.
What is ISR?
Income Sensitive Repayment (ISR) is a federal student loan repayment plan designed specifically for FFEL loans. It allows you to roll all your FFEL loans, as well as any Stafford loans, into a single monthly payment. Th goal of an ISR is to match your monthly payments to your income and family size. This makes it easier to pay off your debt without creating undue stress on your budget.
Why does ISR only work for FFEL and Stafford?
An ISR plan can include any of the following types of student loans:
- FFEL loans, PLUS loans and consolidation loans
- Stafford loans, subsidized or unsubsidized
Basically, you can include any loans taken out through the Family Federal Education Loan (FFEL) Program. It’s important to note that Stafford Loans can come from two different programs – Direct and FFEL. ISR deals specifically with anything that came out of FFEL program. The FFEL program ended in April 2009. However, many borrowers still have FFEL loans to pay off.
It’s important to note that if you have Stafford Loans through the Federal Direct Program, you use Direct Repayment Plans. The most similar repayment plan for Direct Loans is the Income Contingent Repayment Plan.
How income sensitive repayment works
- First you list all the Stafford and FFEL loans that you wish to include in the program. There is no requirement to include all FFEL loans, so you can decide to leave some out if you choose.
- Next the loan servicer determines the interest rate on your ISR. To do this, they take a weighted average of the rates on all included loans.
- There servicer calculates your monthly payments based on income and family size. Monthly payments depend on your Adjusted Gross Income (AGI) and size of your household. In general, payments should be less than 25% of your AGI. However, the monthly payment must at least be high enough to cover accrued interest charges.
- Each year you must recertify your income and family size. Your monthly payments may change, as a result. If you advance in your career or get a raise, you should expect your payments to increase.
- An ISR has a 10-year term. This means you make 120 payments to achieve eliminate all your FFEL student loan debt.
3 Important Facts about Income Sensitive Repayment
#1: ISR doesn’t qualify you for PSLF
If you have FFEL loans and you work public service, you may want to use Public Service Loan Forgiveness (PSLF). PSLF forgives part of your debt after 10 years of making payments on an approved hardship repayment plan. However, ISR eliminates your FFEL debt in-full within 10 years, so there would be nothing to forgive after 120 payments.
If you want to include FFEL loans in a program that qualifies for PSLF, you must first consolidate them with a Federal Direct Consolidation Loan. This effectively converts your FFEL student loan debt into Direct student loan debt. Then you can use a PSLF-qualified hardship repayment plan, such as an IBR.
#2: An IBR may also be cheaper
The structure of ISR plans is slightly different from other hardship student loan repayment plans. The term is much shorter – 10 years compared to the 25-year terms on most IBR programs. There’s also the requirement that the monthly payments must at least cover accrued interest charges, regardless of the borrower’s AGI. IBR and other hardship programs don’t have that requirement.
As a result, IBR monthly payments are often lower compared to ISR payments. If you have budget challenges, you may be better off if you convert your debt and enroll in an IBR. You can also include only some of your loans in an ISR, but convert others with a Direct Consolidation Loan. This kind of elimination strategy can help you get to zero faster.
#3: Like all repayment plans, ISR is subject to change
The Department of Education oversees all federal repayment plans, even though payment administration goes through private loan servicers. The DOE can make minor changes to these programs without Congressional approval. And the programs can be changed significantly or cancelled entirely with one decision from Congress.
This means if you want to use a program like ISR, you should have a sense of urgency to enroll as soon as possible. Otherwise, a plan may change or disappear completely before you can to get in while the getting is good. In most cases, the government won’t retroactively change the rules on people who are already enrolled in a program. So, don’t procrastinate on signing up for an ISR!