[Federal Register Volume 62, Number 126 (Tuesday, July 1, 1997)]
[Rules and Regulations]
[Pages 35602-35606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17130]



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Part IV





Department of Education





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34 CFR Part 685



William D. Ford Federal Direct Loan Program; Final Rule

  Federal Register / Vol. 62, No. 126 / Tuesday, July 1, 1997 / Rules 
and Regulations  

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DEPARTMENT OF EDUCATION

34 CFR Part 685

RIN 1840-AC43


William D. Ford Federal Direct Loan Program

AGENCY: Department of Education.

ACTION: Final regulations.

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SUMMARY: These regulations contain revised income percentage factors 
for the income contingent repayment plan, a repayment plan available in 
the William D. Ford Federal Direct Loan (Direct Loan) Program. In 
addition, these regulations contain updated sample income contingent 
repayment amounts for single and married or head-of-household borrowers 
at various income and debt levels.

EFFECTIVE DATE: These regulations take effect July 1, 1997.

FOR FURTHER INFORMATION CONTACT: Ms. Rachel Edelstein, Program 
Specialist, Direct Loan Policy, Policy Development Division, U.S. 
Department of Education, Room 3053, ROB-3, 600 Independence Avenue, SW, 
Washington, D.C. 20202-5400. Telephone: (202) 708-8242. Individuals who 
use a telecommunications device for the deaf (TDD) may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 
p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The regulations are amended to revise the 
income percentage factors and sample repayment amount information in 
final regulations in Appendix A to 34 CFR Part 685, published on June 
19, 1996 (61 FR 31358).
    The Secretary has revised the table in the appendix showing income 
percentage factors to reflect changes based on inflation. The revised 
table was developed by changing the dollar amounts shown by a 
percentage equal to the estimated percentage changes in the Consumer 
Price Index for all Urban Consumers from December 1996 to December 
1997. In addition, the examples of the calculation of monthly repayment 
amounts and the charts showing sample repayment amounts have been 
amended to reflect the updated income percentage factors.
    Under the updated income percentage factors, at any given income, 
borrowers' payments will be slightly lower than under the income 
percentage factors published in the June 19, 1996 regulations. These 
updated income percentage factors more accurately reflect a borrower's 
current ability to repay than those previously published because these 
factors are based on more recent data.

Waiver of Proposed Rulemaking

    In accordance with section 437 of the General Education Provisions 
Act, 20 U.S.C. 1232, and the Administrative Procedure Act, 5 U.S.C. 
553, it is the practice of the Secretary to offer interested parties 
the opportunity to comment on proposed regulations. However, the 
changes in this document do not establish any new rules but simply 
update the income percentage factors used in the income contingent 
repayment plan, as required under 34 CFR 685.209(a)(8), and revise 
sample repayment information accordingly. Therefore, the Secretary has 
determined that publication of a proposed rule is unnecessary and 
contrary to the public interest under 5 U.S.C. 553(b)(B). For the same 
reasons, the Secretary waives the 30-day delayed effective date under 5 
U.S.C. 553(d).

Paperwork Reduction Act of 1995

    These regulations have been examined under the Paperwork Reduction 
Act of 1995 and have been found to contain no information collection 
requirements.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have 
significant economic impact on a substantial number of small entities. 
The regulations will affect borrowers who are in repayment and will not 
affect institutions participating in the Direct Loan Program. The 
Regulatory Flexibility Act does not include individuals in its 
definition of ``small entities''. Thus, the changes will not have a 
significant economic impact on any small entities under the Regulatory 
Flexibility Act.

Assessment of Educational Impact

    The Secretary has determined that the regulations in this document 
would not require transmission of information that is being gathered by 
or is available from any other agency or authority of the United 
States.

List of Subjects in 34 CFR Part 685

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs-education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

(Catalog of Federal Domestic Assistance Number 84.268 William D. 
Ford Federal Direct Loan Program)

    Dated: June 25, 1997.
Richard W. Riley,
Secretary of Education.

    The Secretary amends Part 685 of title 34 of the Code of Federal 
Regulations as follows:

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

    1. The authority citation for part 685 continues to read as 
follows:

    Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.

    2. Appendix A to part 685 is revised to read as follows:

Appendix A to part 685--Income Contingent Repayment

Examples of the Calculation of Monthly Repayment Amounts

    Example 1. A single borrower with $12,500 of Direct Loans, 8.25 
percent interest rate, and an adjusted gross income (AGI) of 
$22,791.
    Step 1: Determine annual payments based on what the borrower 
would pay over 12 years using standard amortization. To do this, 
multiply the principal balance by the constant multiplier for 8.25 
percent interest (0.1315452). The constant multiplier is a factor 
used to calculate amortized payments at a given interest rate over a 
fixed period of time. (See the constant multiplier chart below to 
determine the constant multiplier you should use for the interest 
rate on the loan. If the exact interest rate is not listed, use the 
next highest for estimation purposes.)

 0.1315452 x 12,500=1,644.315

    Step 2: Multiply the result by the income percentage factor 
shown in the income percentage factor table that corresponds to the 
borrower's income (if the income is not listed, you can calculate 
the applicable income percentage factor by following the 
instructions under the interpolation heading below):

 80.33% (0.8033) x 1,644.315=1,320.8782

    Step 3: Determine 20 percent of discretionary income. For a 
single borrower, subtract the poverty level for a family of one, as 
published in the Federal Register on March 10, 1997 (62 FR 10856), 
from the borrower's income and multiply the result by 20%:

 $22,791--$7,890=$14,901
 $14,901 x 0.20=$2,980.20

    Step 4: Compare the amount from step 2 with the amount from step 
3. The lower of the two will be the borrower's annual payment 
amount. This borrower will be paying the amount calculated under 
step 2. To determine the monthly repayment amount, divide the annual 
amount by 12.

 1,320.878212=$110.07

    Example 2. Married borrowers repaying jointly under the income 
contingent repayment plan with a combined AGI of $28,627. The 
husband has a Direct Loan balance of $5,000, and the wife has a 
Direct Loan balance of $15,000. The interest rate is 8.25 percent. 
This couple has no children.

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    Step 1: Add the Direct Loan balances of the husband and wife 
together to determine the aggregate loan balance.

 $5,000+$15,000=$20,000

    Step 2 Determine the annual payments based on what the couple 
would pay over 12 years using standard amortization. To do this, 
multiply the aggregate principal balance by the constant multiplier 
for 8.25 percent interest (0.1315452). (See the constant multiplier 
chart to determine the constant multiplier you should use for the 
interest rate on the loan. If the exact interest rate is not listed, 
choose the next highest rate for estimation purposes.)

 0.1315452 x 20,000=2,630.904

    Step 3 Multiply the result by the income percentage factor shown 
in the income percentage factor table that corresponds to the 
couple's income (if the income is not listed, you can calculate the 
applicable income percentage factor by following the instructions 
under the interpolation heading below):

 87.61% (0.8761) x 2,630.904=2,304.9350

    Step 4 Determine 20 percent of the couple's discretionary 
income. To do this, subtract the HHS poverty level for a family of 
2, as published in the Federal Register on March 10, 1997 (62 FR 
10856), from the couple's income and multiply the result by 20 
percent:

 $28,627--$10,610=$18,017
 $18,017 x 0.20=$3,603.40

    Step 5 Compare the amount from step 3 with the amount from step 
4. The lower of the two will be the annual payment amount. The 
married borrowers will be paying the amount calculated under step 3. 
To determine the monthly repayment amount, divide the annual amount 
by 12.

 2,304.935012=$192.08

    Interpolation: If your income does not appear on the income 
percentage factor table, you will have to calculate the income 
percentage factor through interpolation. For example, assume you are 
single and your income is $26,000. To interpolate, you must first 
find the interval between the closest income listed that is less 
than $26,000 and the closest income listed that is greater than 
$26,000 (for this discussion, we'll call the result ``the income 
interval''):

 $28,627--$22,791=$5,836

Next, find the interval between the two income percentage factors 
that are given for these incomes (for this discussion, we'll call 
the result, the ``income percentage factor interval''):

 88.77--80.33=8.44
Subtract the income shown on the chart that is immediately less than 
$26,000 from $26,000:

 $26,000-$22,791=$3,209

Divide the result by the number representing the income interval:

 $3,209$5,836=0.5499

Multiply the result by the income percentage factor interval:

 0.5499 x 8.44=4.64

Add the result to the lower income percentage factor used to 
calculate the income percentage factor interval for $26,000 in 
income:

 4.64+80.33=84.97%

The result is the income percentage factor that will be used to 
calculate the monthly repayment amount under the income contingent 
repayment plan.

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[FR Doc. 97-17130 Filed 6-30-97; 8:45 am]
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