Publication Date: June 4, 2013

Posted Date: June 4, 2013

Subject: Annual Updates to the Income Contingent Repayment (ICR) Plan Formula for 2013--William D. Ford Federal Direct Loan Program

FR Type: Notice

[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]

[Notices]

[Pages 33395-33398]

From the Federal Register Online via the Government Printing 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: ian.foss@ed.gov.

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:

Repayment Amounts

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.***NOTE: CHART OMITTED -- SEE PDF FILE**

General notes about the examples in this attachment:

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.

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.

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.

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.

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.

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--

time the calculation is performed;

decimal (for example, for a loan with an interest rate of 6.8

percent, 0.068); and

(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.

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.

Step 3: Next, resolve the fraction by dividing the result from step

one by the result from step two.

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.

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.

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:

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:

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.

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:

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:

For Susan, the monthly payment amount will be:

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.

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:

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''):

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''):

Step 4: Subtract from Joan's income the closest income shown on the

chart that is less than Joan's income of $50,000:

Step 5: Divide the result of Step 4 by the income interval

determined in Step 2:

Step 6: Multiply the result of Step 5 by the income percentage

factor interval:

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:

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.***NOTE: CHART OMITTED -- SEE PDF FILE**

[FR Doc. 2013-13193 Filed 6-3-13; 8:45 am]

BILLING CODE 4000-01-P