EVERYTHING YOU NEED TO KNOW ABOUT THE INCOME SENSITIVE REPAYMENT PLAN

Curious about the Income Sensitive Repayment Plan? Here is everything you need to know.

The Income Sensitive Repayment Plan is a 10 year payment plan for low income borrowers who have FFEL Program loans and who want to lower their monthly payment. Under this plan, payments increase or decrease depending on your annual income.

Figuring out how to navigate your student loan debt is like trying to figure out what to eat for lunch when you’re already hangry. (anger induced by hunger).

There are so many different options, that it leaves you (or at least, me) feeling like sticking my head under a rug and sobbing. (I get dramatic when I’m hungry). And to make matters worse, each student loan option is needlessly complicated. Its like trying to order a basic meal (a #1– a plain hamburger with fries and a Diet Coke) and then having your waiter assault you with sundry of questions. Well do you want special sauce with that? Do you want onions? What about grilled onions? Lettuce? Tomato? What about trying something crazy on it, like pineapple? Jalapeno? And before you know it, you’ve collapsed on the ground, too hungry to make any decisions. In each of the federal student loan forgiveness options, you have to follow the rules with precision in order to have your loans forgiven. So, first, you have to know what those rules are before you can make a decision. But the rules can be hard to understand. And your hungry. And understanding things when your hungry is hard. So, in our student loans simplified series, we are breaking down each of the federal student loan repayment options in bite sized pieces to help you understand and make the best decision for you.

Who’s hungry?

Here is everything that you need to know about the Extended Repayment Plan to determine if its right for you.

• ONLY FFEL Program loans  loans qualify for Income Sensitive Repayment. (that means Stafford loans, FFEL PLUS loans and FFEL Consolidation loans) 

  • This makes the Income Sensitive Repayment plan one of the least well known repayment plans out there.
  • Fun fact, President Obama axed the FFEL Program back in 2010, so in a few years, Income Sensitive Repayment will likely become moot.
  • If you aren’t sure whether your loans fall under the FFEL program, you can contact your loan servicer to find out. If you aren’t sure who your loan servicer is, you can find out at National Student Loan Data System (NSLDS^®)

• Payments are made for 10 years and increase or decrease depending on your gross income

  • Unlike many of the other repayment plans, Income Sensitive Repayment looks at your gross income and not your adjusted gross income.
  • Unlike many of the other repayment plans, Income Sensitive Repayment does NOT factor in your spouse’s income to determine your monthly payment.

• Monthly payments under the Income Sensitive Repayment plan will range from 4% to 25% of your income 

  • You can generally choose a percentage of income that you believe you can afford to pay under the Income Sensitive Repayment Plan, ranging anywhere from 4% to 25% of your income. You can also make extra payments on this plan if you wish to do so. You must make a payment of at least $5 each month.
  • No matter what you end up paying each month on the Income Sensitive Repayment Plan, you will have to pay at least the interest that is accruing on your loans.
  • TIP: if you can’t afford to make even the interest payments on your loans, you are probably a good candidate for one of the income-driven repayment plans which will allow the balance of your loans to be forgiven after a 20-25 year period. Learn more about the income driven repayment plans, PAYE, REPAYE, IBR and ICR.
  • Since interest is going to be accruing on the principal balance of your loan, having a lower monthly payment is not necessarily a good thing. That balance can balloon up fairly quickly. If you do not expect your income to increase enough to make up for the bigger student loan balance you will carry as a result of making small payments, consider one of the income driven repayment plans which will buy you more time to either pay off your loans or have the remaining balance forgiven.

• After the first 5 years under the Income Sensitive Repayment plan, borrowers will have to start making more aggressive payments. 

 

Who should use Income Sensitive Repayment: Borrowers who are struggling to make their student loan payments who do not wish to consolidate their FFEL loans to qualify for one of the income-driven repayment plans or who otherwise would rather pay off their loans within 10 years than deal with income-driven repayment which requires a 20-25 year repayment period.

Overall, Income Sensitive Repayment is a solid repayment plan for people with FFEL Program loans who do not wish to go the income-driven repayment route. It is a program worth considering if you qualify.

Are you signed up for the Income Sensitive Repayment Plan? What do you like or dislike about it?

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OTHER POSTS IN OUR STUDENT LOANS SIMPLIFIED SERIES:

EVERYTHING YOU NEED TO KNOW ABOUT THE EXTENDED REPAYMENT PLAN