[Federal Register Volume 63, Number 138 (Monday, July 20, 1998)]
[Rules and Regulations]
[Pages 39010-39013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19158]



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Part III





Department of Education





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34 CFR Part 685



William D. Ford Federal Direct Loan Program; Final Rule

  Federal Register / Vol. 63, No. 138 / Monday, July 20, 1998 / Rules 
and Regulations  

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DEPARTMENT OF EDUCATION

34 CFR Part 685


William D. Ford Federal Direct Loan Program

AGENCY: Office of Postsecondary Education, 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. The 
regulations also 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 on July 1, 1998.

FOR FURTHER INFORMATION CONTACT: Mr. Donald Watson, Management Analyst, 
Direct Loan Policy, Policy Development Division, U.S. Department of 
Education, Room 3045, ROB-3, 600 Independence Avenue, SW., Washington, 
DC 20202-5400. Telephone number: (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.
    Individuals with disabilities may obtain this document in an 
alternate format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in the preceding 
paragraph.

SUPPLEMENTARY INFORMATION: The Direct Loan income contingent repayment 
plan regulations are amended to revise the four sources of information 
contained in Appendix A to 34 CFR Part 685, published on July 1, 1997 
(62 FR 35602): examples of how the calculation of the monthly ICR 
repayment amount is performed, the income percentage factors, the 
constant multiplier chart, and charts showing sample repayment amounts.
    The income percentage factors have been updated to reflect changes 
based on inflation. The revised income percentage factor table was 
developed by changing the dollar amounts of the incomes shown by a 
percentage equal to the estimated percentage change in the Consumer 
Price Index for all Urban Consumers from December 1997 to December 
1998. Further, the examples of the calculations of the monthly 
repayment amounts and the two charts showing sample repayment amounts 
for single and married or head of household borrowers at various income 
and debt levels have been amended to reflect the updated income 
percentage factors.
    The updated income percentage factors, at any given income, may 
cause a borrower's payments to be slightly lower than under the income 
percentage factors published in the July 1, 1997 regulations. These 
updated income percentage factors more accurately reflect a borrower's 
current ability to repay than those previously published because the 
revised factors are based on more recent economic data.

Waiver of Proposed Rulemaking

    In accordance with the Administrative Procedure Act, 5 U.S.C. 553, 
it is customary for the Secretary to offer interested parties the 
opportunity to comment on proposed regulations. However, the changes in 
this document do not establish any new substantive 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 notice of proposed rulemaking 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.

Electronic Access to this Document

    Anyone may view this document, as well as all other Department of 
Education documents published in the Federal Register, in the text or 
portable document format (pdf) on the World Wide Web at either of the 
following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

To use the pdf you must have the Adobe Acrobat Reader Program with 
Search, which is available free at either of the previous sites. If you 
have questions about using the pdf, call the U.S. Government Printing 
Office at (202) 512-1530 or, toll free, at 1-888-293-6498.

    Anyone may also view these documents in text copy only on an 
electronic bulletin board of the Department. Telephone: (202) 219-1511 
or, toll free, 1-800-222-4922. The documents are located under Option 
G--Files/Announcements, Bulletins and Press Releases.

    Note: The official version of this document is the document 
published in the Federal Register.

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.

    Dated: July 13, 1998.
Richard W. Riley,
Secretary of Education.

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

    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 Calculations of Monthly Repayment Amounts

    Example 1. A single borrower with $15,000 of Direct Loans, 8.25 
percent interest rate, and an adjusted gross income (AGI) of 
$23,356.
    Step 1: Determine annual payments based on what the borrower 
would pay over 12

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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  $15,000 = $1,973.18

    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  $1,973.18 = $1,585.06

    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 February 24, 1998 (63 FR 9235), 
from the borrower's income and multiply the result by 20%:

 $23,356-$8,050 = $15,306
 $15,306  x  0.20 = $3,061.20

    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.

 $1,585.05  12 = $132.09

    Example 2. Married borrowers repaying jointly under the income 
contingent repayment plan with a combined AGI of $29,337. The 
husband has a Direct Loan balance of $10,000, and the wife has a 
Direct Loan balance of $15,000. The interest rate is 8.25 percent. 
This couple has no children.
    Step 1: Add the Direct Loan balances of the husband and wife 
together to determine the aggregate loan balance.

 $10,000 + $15,000 = $25,000

    Step 2: Determine the annual payment 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  $25,000 = $3,288.63

    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  $3,288.63 = $2881.17

    Step 4: Determine 20 percent of the couple's discretionary 
income. To do this, subtract the poverty level for a family of 2, as 
published in the Federal Register on February 24, 1998 (63 FR 9235), 
from the couple's income and multiply the result by 20 percent:

 $29,337-$10,850 = $18,487
 $18,487  x  0.20 = $3,397.40

    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.

 $2,881.17  12 = $240.10

    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 $30,000.
    Step 1: To interpolate, you must first find the interval between 
the closest income listed that is less than $30,000 and the closest 
income listed that is greater than $30,000. Afterwards, you must 
subtract these numbers (for this discussion, we will call the result 
``the income interval''):

 $36,793-$29,337 = $7,456

    Step 2: Next, find the interval between the two income 
percentage factors that are given for these incomes (for this 
discussion, we will call the result, the ``income percentage factor 
interval''):

 100.00%-88.77 = 11.23%

    Step 3: Subtract the income shown on the chart that is 
immediately less than $30,000 from $30,000:

 $30,000-$29,337 = $663

    Step 4: Divide the result by the number representing the income 
interval:

 $663  $7,456 = 0.0889

    Step 5: Multiply the result by the income percentage factor 
interval:

 0.0889  x  11.23 = 0.9983

    Step 6: Add the result to the lower income percentage factor 
used to calculate the income percentage factor interval for $30,000 
in income:

 .9983% + 88.77% = 89.77%

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

                        Income Percentage Factors                       
                        [Based on annual income]                        
------------------------------------------------------------------------
                      Single                           Married/head of  
---------------------------------------------------       household     
                                                   ---------------------
                 Income                   Percent               Percent 
                                           factor     Income     factor 
------------------------------------------------------------------------
7,669..................................      55.00      7,669      50.52
10,552.................................      57.79     12,101      56.68
13,578.................................      60.57     14,422      59.56
16,673.................................      66.23     18,853      67.79
19,629.................................      71.89     23,356      75.22
23,356.................................      80.33     29,337      87.61
29,337.................................      88.77     36,793     100.00
36,793.................................     100.00     44,251     100.00
44,251.................................     100.00     55,438     109.40
53,185.................................     111.80     74,080     125.00
68,101.................................     123.50    100,180     140.60
96,452.................................     141.20    140,106     150.00
110,592................................     150.00    228,943     200.00
196,984................................     200.00                      
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           Constant Multiplier Chart for 12-Year Amortization           
------------------------------------------------------------------------
                                                                Annual  
                  Interest rate  (percent)                     constant 
                                                              multiplier
------------------------------------------------------------------------
7.00.......................................................     0.123406
7.25.......................................................     0.125011
7.46.......................................................     0.126368
7.50.......................................................     0.126627
7.75.......................................................     0.128255
8.00.......................................................     0.129894
8.25.......................................................     0.131545
8.38.......................................................     0.132408
8.50.......................................................     0.133207
8.75.......................................................     0.134880
9.00.......................................................     0.136564
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[FR Doc. 98-19158 Filed 7-17-98; 8:45 am]
BILLING CODE 4000-01-C