Income-Sensitive Repayment Plan

The Income-Sensitive Repayment Plan is a student loan repayment plan that is offered to student loan borrowers through the Department of Education.

This plan is another income-driven repayment option available that is similar to the Income Contingent Repayment Plan.

However, the Income-Sensitive Repayment Plan only assists borrowers in paying off student loans made under the Federal Family Education Loan Program.

In this plan, the borrower’s servicer determines the monthly payment amount by using the following factors:

Total debt amount
Gross monthly income
Debt-to-income ratio
Interest rate

After calculating these factors, the servicer sets up a payment amount that can range from 4% to 25% of the borrower’s monthly income.

Since July 1, 2010, Federal Family Education Loans have not been available to student loan borrowers. That means there’s a possibility that you don’t have any FFEL Loans if you’re a relatively new student loan borrower.

Since the repayment terms and eligibility requirements are rather specific, the Income-Sensitive Repayment Plan is not a very popular repayment option. It’s kind of turned into the forgotten step-child of loan repayment plans.

Student loan borrowers entering the Extended Repayment Plan will have access to the following benefits:

A monthly payment based entirely on your annual income
A 10-year loan repayment period

What types of loans are eligible for the Income-Sensitive Repayment Plan

Student loan borrowers that have loans made under the FFEL Program can pay their loans under an Income-Sensitive Repayment Plan. William D. Ford Federal Direct Loans are not eligible for this repayment plan.

Here are the loans that are eligible for the Income-Sensitive Repayment Plan:

Subsidized Federal Stafford Loans
Unsubsidized Federal Stafford Loans
FFEL Student PLUS Loans
FFEL Parent PLUS Loans
FFEL Consolidation Loans

Do you have Private Student Loans?

Private Student Loans are not eligible for the Standard Repayment Plan or any repayment plan offered through the Department of Education. Please contact your servicer to see what repayment options are available to you.

Who is the Income-Sensitive Repayment Plan for?

A student loan borrower can benefit from the Income-Sensitive Repayment Plan if they meet the criteria below:

Struggling to make their full FFEL Loan payment
FFEL Loan borrowers with a low income compared to their student loan debt
Borrowers that want a 10-year repayment plan

Who is the Income-Sensitive Repayment Plan not for?

The Income-Sensitive Repayment Plan is not a common repayment plan for most student loan borrowers. It’s often confused with an income-driven repayment plan. However, these are very different payment methods.

Here are some reasons why a student loan borrower might want to choose a different repayment plan:

Student loan borrowers that have a high income and low family size
Your current monthly payment does not exceed 10% of your income
Anyone that can comfortably make their current Standard monthly payment
Student loan borrowers that have William D Ford Direct Loans

(Did You Know? There’s plenty of other repayment plans that you could benefit if the Income Sensitive Repayment plan isn’t the one for you. This 8-Plan Cheat Sheet breaks each of the best ones down for you, so you can easily select the one that best fits you and your lifestyle. Learn more and download it for free, here.)

Am I eligible for the Income-Sensitive Repayment Plan?

Not every student loan borrower is eligible for the Income-Sensitive Repayment Plan. It’s actually a pretty exclusive repayment plan compared to the others.

Here are the eligibility requirements:

You need to have loans made under the Federal Family Education Loan Program

Note that FFEL Loans stop distribution on July 1, 2010. It’s likely that you didn’t borrow any FFEL Loans while you attended school. If you’re still looking for a lower payment, you might want to look at the income-driven repayment plans offered by the Department of Education.

How long will I be in the Income-Sensitive Repayment Plan?

The repayment period for the Income-Sensitive Repayment Plan is 10 years. Your annual income will determine the amount of your payment each year.

Depending on your financial situation, making all 120 payments on time is the easiest and quickest way to repay your student loans in this plan.

If you start making payments in the Income-Sensitive Repayment Plan and decide it’s not the right plan for you (or if you experience a financial crisis), you can choose to take yourself out of the plan.

It’s common for many student loan borrowers to enter an income-driven repayment plan after they realize an Income-Sensitive Repayment Plan is not an affordable method to pay off their student loan debt.

It probably sounds weird when you read it, but the Income-Sensitive Repayment Plan is not a part of the four income-driven repayment plans offered by the Department of Education.

Here is a list of the income-driven repayment plans:

Income Based Repayment Plan
Pay As You Earn Repayment Plan
Revised Pay As You Earn Repayment Plan
Income Contingent Repayment Plan

Is the payment the same each month?

The monthly payment in the Income-Sensitive Repayment Plan will change each year based on your annual income.

If your income increases, your monthly payment increases.
If your income decreases, your monthly payment decreases.
If your income stays the same, your payment will most likely stay the same.

Contact your loan servicer if you have any questions about making payments on an Income-Sensitive Repayment Plan.

Note that the Income-Sensitive Repayment Plan might not give you the lowest payment based on your current financial situation. In some cases, the plan can give you a higher payment than the Standard Repayment Plan. It’s important to look at all of your options to see what plan works best for you and your family.

What is an income-driven repayment plan?

An income-driven repayment plan is a repayment plan that can help student loan borrowers get a more affordable monthly loan payment based on income and the size of their family.

These repayment plans originated from the passing of the Health Care and Education Reconciliation Act of 2010.

While there are four income driven repayment plans, not all income-driven plans are built for everyone. Depending on your unique financial situation, there might only be one repayment plan that makes sense for you.

Sometimes borrowers qualify for multiple income-driven repayment plans and can’t decide which one makes the most sense.

Need help with that? Give us a call.

What factors come into play with the Income-Sensitive Repayment Plan

Your monthly payment for the Income-Sensitive Repayment Plan is calculated based on the following factors:

Annual Income – your monthly payment is based on your annual income each year you’re in the program
Amount Of Student Loan Debt – your monthly payment is based on your annual income and the amount of loan balance
Type of loans – only loans from the Federal Family Education Loan Program are eligible (*Federal Direct Loans and Private Student Loans are not eligible)