[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]
[Notices]
[Pages 33395-33398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13193]
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DEPARTMENT OF EDUCATION
Annual Updates to the Income Contingent Repayment (ICR) Plan
Formula for 2013--William D. Ford Federal Direct Loan Program
Catalog of Federal Domestic Assistance (CFDA) Number: 84.063
AGENCY: Federal Student Aid, Department of Education.
ACTION: Notice.
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SUMMARY: The Secretary announces the annual updates to the ICR plan
formula for 2013, as provided in 34 CFR 685.209(a)(8), to give notice
to Direct Loan borrowers and the public regarding how monthly ICR
payment amounts will be calculated for the 2013-2014 year.
DATES: The adjustments to the income percentage factors for the ICR
plan formula contained in this notice are effective from July 1, 2013,
to June 30, 2014, for any borrower who enters the ICR plan or has his
or her monthly payment amount recalculated under the ICR plan during
that period.
FOR FURTHER INFORMATION CONTACT: Ian Foss, U.S. Department of
Education, 830 First Street, NE., room 114I1, Washington, DC 20202.
Telephone: (202) 377-3681 or by email: [email protected].
If you use a telecommunications device for the deaf (TDD) or a text
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.
SUPPLEMENTARY INFORMATION: Under the William D. Ford Federal Direct
Loan (Direct Loan) Program, borrowers may choose to repay their loans
(Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans
made to graduate or professional students, and Direct Consolidation
Loans) under the ICR plan. The ICR plan bases the borrower's repayment
amount on the borrower's income, family size, loan amount, and the
interest rate applicable to each of the borrower's loans.
A Direct Loan borrower who repays his or her loans under the ICR
plan pays the lesser of: (1) the amount that he or she would pay over
12 years with fixed payments multiplied by an income percentage factor
or (2) 20 percent of discretionary income.
Each year, to reflect changes in inflation, we adjust the income
percentage factor used to calculate a borrower's ICR payment. We use
the adjusted income percentage factors to calculate a borrower's
monthly ICR payment amount when the borrower initially applies for the
ICR plan or when the borrower submits his or her annual income
documentation, as required under the ICR plan. This notice contains the
adjusted income percentage factors for 2013, examples of how the
monthly payment amount in ICR is calculated, and charts showing sample
repayment amounts based on the adjusted ICR plan formula. This
information is included in the following three attachments:
Attachment 1--Income Percentage Factors for 2013
Attachment 2--Examples of the Calculations of Monthly
Repayment Amounts
Attachment 3--Charts Showing Sample Repayment
Amounts for Single and Married Borrowers
In Attachment 1, to reflect changes in inflation, we have updated
the income percentage factors that were published in a Federal Register
on May 22, 2012 (77 FR 30266). Specifically we have revised the table
of income percentage factors by changing the dollar amounts of the
incomes shown by a percentage equal to the estimated percentage change
in the not-seasonally-adjusted Consumer Price Index for all urban
consumers from December 2012 to December 2013.
The income percentage factors reflected in Attachment 1 may cause a
borrower's payments to be lower than they were in prior years, even if
the borrower's income is the same as in the prior year. However, the
revised repayment amount more accurately reflects the impact of
inflation on the borrower's current ability to repay.
Accessible Format: Individuals with disabilities can obtain this
document in an accessible format (e.g., braille, large print,
audiotape, or compact disc) on request to the contact person listed
under FOR FURTHER INFORMATION CONTACT in this section of the notice.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. Free
Internet access to the official edition of the Federal Register and the
Code of Federal Regulations is available via the Federal Digital System
at: www.gpo.gov/fdsys. At this site, you can view this document, as
well as all other documents of this Department published in the Federal
Register, in text or Adobe Portable Document Format (PDF). To use PDF
you must have Adobe Acrobat Reader, which is available free at the
site.
You may also access documents of the Department published in the
Federal Register by using the article search feature at:
www.federalregister.gov.
[[Page 33396]]
Specifically, through the advanced search feature at this site, you can
limit your search to documents published by the Department.
Program Authority: 20 U.S.C. 1087 et seq.
Dated: May 30, 2013.
James W. Runcie,
Chief Operating Officer, Federal Student Aid.
Attachment 1--Income Percentage Factors for 2013
Income Percentage Factors for 2013
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Single Married/head of
----------------------------------------------------- household
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Income % Factor Income % Factor
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$10,690................................... 55.00 $10,690 50.52
14,708.................................... 57.79 16,867 56.68
18,926.................................... 60.57 20,100 59.56
23,239.................................... 66.23 26,276 67.79
27,359.................................... 71.89 32,552 75.22
32,552.................................... 80.33 40,888 87.61
40,888.................................... 88.77 51,279 100.00
51,280.................................... 100.00 61,676 100.00
61,676.................................... 100.00 77,269 109.40
74,126.................................... 111.80 103,250 125.00
94,916.................................... 123.50 139,627 140.60
134,433................................... 141.20 195,275 150.00
154,139................................... 150.00 319,093 200.00
274,549................................... 200.00 ........ ........
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Attachment 2--Examples of the Calculations of Monthly Repayment Amounts
General notes about the examples in this attachment:
We have two calculators that borrowers can use to estimate
what their payment amount would be under the ICR plan. The first is
available on StudentAid.gov/ICR. The second, a ``Repayment Estimator''
available at StudentLoans.gov, provides more detailed, individualized
information about a borrower's loans and repayment plan options,
including the ICR plan.
The interest rates used in the examples are for
illustration only. The actual interest rates on an individual
borrower's Direct Loans depend on the loan type and when the
postsecondary institution first disbursed the Direct Loan to the
borrower.
The Poverty Guideline amounts used in the examples are
from the 2013 U.S. Department of Health and Human Services (HHS)
Poverty Guidelines for the 48 contiguous States and the District of
Columbia, as published in the Federal Register on January 24, 2013 (78
FR 5182). Different Poverty Guidelines apply to residents of Alaska and
Hawaii.
All of the examples use an income percentage factor
corresponding to an adjusted gross income (AGI) in the table in
Attachment 1. If your AGI is not listed in the income percentage
factors table in Attachment 1, calculate the applicable income
percentage by following the instructions under the heading later in
this attachment.
Married borrowers may repay their Direct Loans jointly
under the ICR plan. If a married couple elects this option, we add the
outstanding balance on the Direct Loans of each borrower and we add
together both borrowers' AGIs to determine a joint ICR payment amount.
We then prorate the joint payment amount for each borrower based on the
proportion of that borrower's debt to the total outstanding balance. We
bill each borrower separately.
For example, if a married couple, John and Sally, has a
total outstanding Direct Loan debt of $60,000, of which $40,000 belongs
to John and $20,000 to Sally, we would apportion 67 percent of the
monthly ICR payment to John and the remaining 33 percent to Sally. To
take advantage of a joint ICR payment, married couples need not file
taxes jointly; they may file separately and subsequently provide the
other spouse's tax information to the borrower's Federal loan servicer.
Calculating the monthly payment amount using a standard
amortization and a 12-year repayment period.
The formula to amortize a loan with a standard schedule (in which
each payment is the same over the course of the repayment period) is as
follows:
[GRAPHIC] [TIFF OMITTED] TN04JN13.004
In the formula--
M is the monthly payment amount;
P is the outstanding principal balance of the loan at the
time the calculation is performed;
I is the annual interest rate on the loan, expressed as a
decimal (for example, for a loan with an interest rate of 6.8
percent, 0.068); and
N is the total number of months in the repayment period
(for example, for a loan with a 12-year repayment period, 144
months).
For example, assume that Billy has a $10,000 Direct Unsubsidized
Loan with an interest rate of 6.8 percent.
Step 1: To solve for M, first simplify the numerator of the
fraction by which we multiply P, the outstanding principal balance. To
do this divide I, the interest rate, as a decimal, by 12. In this
example, Billy's interest rate is 6.8 percent. As a decimal, 6.8
percent is 0.068.
0.068 / 12 = 0.005667
Step 2: Next, simplify the denominator of the fraction by which we
multiply P. To do this divide I, the interest rate, as a decimal, by
12. Then, add one. Next, raise the sum of the two figures to the
negative power that corresponds to the length of the repayment period
in months. In this example, because we are amortizing a loan to
calculate the monthly payment amount under the ICR plan, the applicable
figure is 12 years, which is 144 months. Finally, subtract one from the
result.
0.068 / 12 = 0.005667
1 + 0.005667 = 1.005667
1.005667 [caret] -144 = 0.44319544
1-0.44319554 = 0.55680456
Step 3: Next, resolve the fraction by dividing the result from step
one by the result from step two.
0.005667 / 0.55680456 = 0.01017772
Step 4: Finally, solve for M, the monthly payment amount, by
multiplying the outstanding principal balance of the loan by the result
of step 3.
$10,000 x 0.01017772 = $101.78
The remainder of the examples in this attachment will only show the
results of the formula.
Example 1. Brenda is single with no dependents and has $15,000
in Direct Subsidized and Unsubsidized Loans. The interest rate on
Brenda's loans is 6.80 percent, and she has an AGI of $27,359.
Step 1: Determine the total monthly payment amount based on what
Brenda would pay over 12 years using standard amortization. To do this,
use the formula that precedes Example 1. In this example, the monthly
payment amount would be $152.67.
Step 2: Multiply the result of Step 1 by the income percentage
factor shown in the income percentage factors table (see Attachment 1
to this notice) that corresponds to Brenda's AGI. In this example, an
AGI of $27,359 corresponds to an income percentage factor of 71.89
percent.
0.7189 x $152.66 = $109.75
Step 3: Determine 20 percent of Brenda's discretionary income and
divide by 12 (discretionary income is AGI minus the HHS Poverty
Guideline amount for a borrower's family size and State of residence).
For Brenda, subtract the Poverty Guideline amount for a family of one
from her AGI, multiply the result by 20 percent, and then divide by 12:
$27,359-$11,490 = $15,869
$15,869 x 0.20 = $3,173.80
$3,173.80 / 12 = $264.48
Step 4: Compare the amount from Step 2 with the amount from Step 3.
[[Page 33397]]
The lower of the two will be the monthly ICR payment amount. In this
example, Brenda will be paying the amount calculated under Step 2
($109.75).
Example 2. Joseph is married to Susan and has no dependents.
Joseph has a Direct Loan balance of $10,000, and Susan has a Direct
Loan balance of $15,000. The interest rate on all of the loans is
6.80 percent.
Joseph and Susan have a combined AGI of $77,269 and are repaying
their loans jointly under the ICR plan (for general information
regarding joint ICR payments for married couples, see the fifth and
sixth bullets under the heading ``General notes about the examples in
this attachment'').
Step 1: Add Joseph's and Susan's Direct Loan balances to determine
their combined aggregate loan balance:
$10,000 + $15,000 = $25,000
Step 2: Determine the combined monthly payment amount for Joseph
and Susan based on what both borrowers would pay over 12 years using
standard amortization. To do this use the formula that precedes Example
1. In this example, the combined monthly payment amount would be
$254.44.
Step 3: Multiply the result of Step 2 by the income percentage
factor shown in the income percentage factors table (see Attachment 1
to this notice) that corresponds to Joseph and Susan's combined AGI. In
this example, the combined AGI of $77,269 corresponds to an income
percentage factor of 109.40 percent.
1.094 x $254.44 = $278.36
Step 4: Determine 20 percent of Joseph and Susan's combined
discretionary income (discretionary income is AGI minus the HHS Poverty
Guideline amount for a borrower's family size and State of residence).
To do this subtract the Poverty Guideline amount for a family of two
from the combined AGI, multiply the result by 20 percent, and divide by
12:
$77,269-$15,510 = $61,759
$61,759 x 0.20 = $12,351.80
$12,351.80 / 12 = $1,029.32
Step 5: Compare the amount from Step 3 with the amount from Step 4.
The lower of the two will be Joseph and Susan's joint monthly payment
amount. Joseph and Susan will jointly pay the amount calculated under
Step 3 ($278.36).
Step 6: Because Joseph and Susan are jointly repaying their Direct
Loans under the ICR plan, the monthly payment amount calculated under
Step 4 applies to both Joseph and Susan's loans. To determine the
amount for which each borrower will be responsible, prorate the amount
calculated under Step 4 by each spouse's share of the combined Direct
Loan debt. Joseph has a Direct Loan debt of $10,000 and Susan has a
Direct Loan Debt of $15,000. For Joseph, the monthly payment amount
will be:
$10,000 / ($10,000 + $15,000) = 40 percent
0.40 x $278.36 = $111.34
For Susan, the monthly payment amount will be:
$15,000 / ($10,000 + $15,000) = 60 percent
0.60 x $278.36 = $167.02
Example 3. David is single with no dependents and has $60,000 in
Direct Subsidized and Unsubsidized Loans. The interest rate on all of
the loans is 6.80 percent, and David's AGI is $32,552.
Step 1: Determine the total monthly payment amount based on what
David would pay over 12 years using standard amortization. To do this
use the formula that precedes Example 1. In this example, the monthly
payment amount would be $610.66.
Step 2: Multiply the result of Step 1 by the income percentage
factor shown in the income percentage factors table (see Attachment 1
to this notice) that corresponds to David's AGI. In this example, an
AGI of $32,552 corresponds to an income percentage factor of 80.33
percent.
0.8033 x $610.66 = $490.54
Step 3: Determine 20 percent of David's discretionary income and
divide by 12 (discretionary income is AGI minus the HHS Poverty
Guideline amount for a borrower's family size and State of residence).
To do this subtract the Poverty Guideline amount for a family of one
from David's AGI, multiply the result by 20 percent, then divide by 12:
$32,552 - $11,490 = $21,062
$21,062 x 0.20 = $4,212.40
$4,212.40 / 12 = $351.03
Step 4: Compare the amount from Step 2 with the amount from Step 3.
The lower of the two will be David's monthly payment amount. In this
example, David will be paying the amount calculated under Step 3
($351.03).
Interpolation. If an income is not included on the income
percentage factor table, calculate the income percentage factor through
linear interpolation. For example, assume that Joan is single with an
income of $50,000.
Step 1: Find the closest income listed that is less than Joan's
income ($50,000) and the closest income listed that is greater than
Joan's income ($50,000).
Step 2: Subtract the lower amount from the higher amount (for this
discussion we will call the result the ``income interval''):
$51,280 - $40,888 = $10,392
Step 3: Determine the difference between the two income percentage
factors that correspond to the incomes used in Step 2 (for this
discussion, we will call the result the ``income percentage factor
interval''):
100.00 percent - 88.77 percent = 11.23 percent
Step 4: Subtract from Joan's income the closest income shown on the
chart that is less than Joan's income of $50,000:
$50,000 - $40,888 = $9,112
Step 5: Divide the result of Step 4 by the income interval
determined in Step 2:
$9,112 / $10,392 = 0.8768
Step 6: Multiply the result of Step 5 by the income percentage
factor interval:
11.23 percent x 0.8768 = 9.846 percent
Step 7: Add the result of Step 6 to the lower of the two income
percentage factors used in Step 3 to calculate the income percentage
factor interval for $50,000 in income:
9.846 percent + 88.77 percent = 98.62 percent (rounded to
the nearest hundredth)
The result is the income percentage factor that we will use to
calculate Joan's monthly repayment amount under the ICR plan.
Attachment 3--Charts Showing Sample Repayment Amounts for Single and
Married Borrowers
Sample First-Year Monthly Repayment Amounts for a Single Borrower at Various Income and Debt Levels
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Family Size = 1
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Income Direct Loan Debt
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$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000
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$10,000................................... $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
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12,500.................................... 17 17 17 17 17 17 17 17 17 17
15,000.................................... 59 59 59 59 59 59 59 59 59 59
17,500.................................... 61 100 100 100 100 100 100 100 100 100
20,000.................................... 63 126 142 142 142 142 142 142 142 142
22,500.................................... 66 133 184 184 184 184 184 184 184 184
25,000.................................... 70 140 210 225 225 225 225 225 225 225
30,000.................................... 78 155 233 309 309 309 309 309 309 309
35,000.................................... 84 169 253 337 392 392 392 392 392 392
40,000.................................... 89 179 268 358 447 475 475 475 475 475
45,000.................................... 95 190 285 379 474 559 559 559 559 559
50,000.................................... 100 201 301 401 502 602 642 642 642 642
60,000.................................... 102 204 305 407 509 611 712 809 809 809
70,000.................................... 110 220 329 439 549 659 769 878 975 975
80,000.................................... 117 234 351 469 586 703 820 937 1,054 1,142
90,000.................................... 123 246 369 492 614 737 860 983 1,106 1,229
100,000................................... 128 256 384 512 640 768 896 1,024 1,152 1,280
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Sample repayment amounts are based on an interest rate of 6.80%
Sample First-Year Monthly Repayment Amounts for a Married or Head-of-Household Borrower at Various Income and Debt Levels
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Family Size = 3
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Income Direct Loan Debt
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$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000
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$10,000................................... $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
12,500.................................... 0 0 0 0 0 0 0 0 0 0
15,000.................................... 0 0 0 0 0 0 0 0 0 0
17,500.................................... 0 0 0 0 0 0 0 0 0 0
20,000.................................... 8 8 8 8 8 8 8 8 8 8
22,500.................................... 50 50 50 50 50 50 50 50 50 50
25,000.................................... 67 91 91 91 91 91 91 91 91 91
30,000.................................... 73 147 175 175 175 175 175 175 175 175
35,000.................................... 80 161 241 258 258 258 258 258 258 258
40,000.................................... 88 176 263 341 341 341 341 341 341 341
45,000.................................... 94 188 282 377 425 425 425 425 425 425
50,000.................................... 100 200 301 401 501 508 508 508 508 508
60,000.................................... 102 204 305 407 509 611 675 675 675 675
70,000.................................... 107 214 321 428 534 641 748 841 841 841
80,000.................................... 113 226 339 452 565 678 791 904 1,008 1,008
90,000.................................... 119 238 357 476 596 715 834 953 1,072 1,175
100,000................................... 125 250 376 501 626 751 877 1,002 1,127 1,252
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Sample repayment amounts are based on an interest rate of 6.80%
[FR Doc. 2013-13193 Filed 6-3-13; 8:45 am]
BILLING CODE 4000-01-P