Income Sensitive Repayment
Income Sensitive Repayment (ISR) is an alternative to income contingent repayment for loans serviced by lenders in the Federal Family Education Loan Program (FFELP). It is designed to make it easier for borrowers with lower paying jobs to make their monthly loan payments.
The monthly loan payment is pegged to a fixed percentage of gross monthly income, between 4% and 25%. The percentage is determined by the borrower and the resulting monthly payment must be greater than or equal to the interest that accrues. Some lenders set a minimum threshold on the percentage of income based on your debt-to-income ratio.
Borrowers must reapply for income sensitive repayment each year. Borrowers are usually required to provide a copy of their income tax returns and/or W-2 statements every time they apply for income sensitive repayment.
Because income sensitive repayment decreases the monthly payment, as compared with standard repayment, and is limited to a ten year repayment term, it increases the size of the rest of the monthly payments to compensate. This will also increase the total amount of interest paid over the lifetime of the loan may be higher than with standard repayment. Students who believe they may need income sensitive repayment for more than a year should also consider extended or graduated repayment, which reduce the size of the monthly payment by increasing the term of the loan.
FinAid provides a Income Sensitive Repayment Calculator that lets you compare the ISR program with standard repayment.
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