[Federal Register Volume 70, Number 115 (Thursday, June 16, 2005)]
[Notices]
[Pages 35067-35071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-11922]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION


William D. Ford Federal Direct Loan Program

AGENCY: Federal Student Aid, Department of Education.

ACTION: Notice of the annual updates to the Income Contingent Repayment 
(ICR) plan formula for 2005.

-----------------------------------------------------------------------

SUMMARY: The Secretary announces the annual updates to the ICR plan 
formula for 2005. Under the William D. Ford Federal Direct Loan (Direct 
Loan) Program, borrowers may choose to repay their student loans 
(Direct Subsidized Loan, Direct Unsubsidized Loan, Direct Subsidized 
Consolidation Loan, and Direct Unsubsidized Consolidation Loan) under 
the ICR plan, which bases the repayment amount on the borrower's 
income, family size, loan amount, and interest rate. Each year, we 
adjust the formula for calculating a borrower's payment to reflect 
changes due to inflation. This notice contains the adjusted income 
percentage factors for 2005 and charts showing sample repayment amounts 
based on the adjusted ICR plan formula. It also contains examples of 
how the calculation of the monthly ICR amount is performed and a 
constant multiplier chart for use in performing the calculations. The 
adjustments for the ICR plan formula contained in this notice are 
effective from July 1, 2005 to June 30, 2006.

FOR FURTHER INFORMATION CONTACT: Don Watson, U.S. Department of 
Education, room 11412, UCP, 400 Maryland Avenue, SW., Washington, DC 
20202-5400. Telephone: (202) 377-4008.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Relay Service (FRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: Direct Loan Program borrowers may choose to 
repay their Direct Subsidized Loan, Direct Unsubsidized Loan, Direct 
Subsidized Consolidation Loan, and Direct Unsubsidized Consolidation 
Loan under the ICR plan. The attachment to this notice provides updates 
to examples of how the calculation of the monthly ICR amount is 
performed, the income percentage factors, the constant multiplier 
chart, and charts showing sample repayment amounts.
    We have updated the income percentage factors to reflect changes 
based on inflation. 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 Consumer 
Price Index for all urban consumers from December 2004 to December 
2005. Further, we provide examples of monthly repayment amount 
calculations and two charts that show sample repayment amounts for 
single and married or head-of-household borrowers at various income and 
debt levels based on 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 they were in 
prior years. This updated amount more accurately reflects the impact of 
inflation on a borrower's current ability to repay.

Electronic Access to This Document

    You may review this document, as well as all other documents of 
this Department published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
http://www.ed.gov/news/federegister.
    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free at 1-888-293-6498; or in 
the Washington, DC area at (202) 512-1530.


    Note: 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 on GPO Access at: http://www.gpoaccess.gov/nara/index.html.


    Program Authority:  20 U.S.C. 1087 et seq.

    Dated: June 13, 2005.
Theresa S. Shaw,
Chief Operating Officer, Federal Student Aid.

Attachment--Examples of the Calculations of Monthly Repayment Amounts

    Example 1. This example assumes you are a single borrower with 
$15,000 in Direct Loans, the interest rate being charged is 8.25 
percent, and you have an adjusted gross income (AGI) of $34,301. 
(The 8.25 percent interest rate used in this example is the maximum 
interest rate that may be charged for all Direct Loans excluding 
Direct PLUS Loans and certain Direct PLUS Consolidation Loans; your 
actual interest rate may be lower.)

    Step 1: Determine your annual payments based on what you would pay 
over 12 years using standard amortization. To do this, multiply your 
loan balance by the constant multiplier for 8.25 percent interest 
(0.131545). The constant multiplier is a factor used to calculate 
amortized payments at a given interest rate over a fixed period of 
time. You can view the constant multiplier chart at the end of this 
notice to determine the constant multiplier that you should use for the 
interest rate on your loan. If your exact interest rate is not listed, 
use the next highest rate for estimation purposes.
     0.131545 x $15,000 = $1,973.18
    Step 2: Multiply the result of Step 1 by the income percentage 
factor shown in the income percentage factors table that corresponds to 
your income and then divide the result by 100 (if your income is not 
listed in the income percentage factors table, calculate the applicable 
income percentage factor by following the instructions under the 
``Interpolation'' heading later in this notice):
     88.77 x $1,973.18 / 100 = $1,751.59
    Step 3: Determine 20 percent of your discretionary income (your 
discretionary income is your AGI minus the HHS Poverty Guideline amount 
for your family size). Because you are a single borrower, subtract the 
poverty level for a family of one, as published in the Federal Register 
on February 18, 2005 (70 FR 8373), from your AGI and multiply the 
result by 20 percent:

[[Page 35068]]

     $34,301 - $9,570 = $24,731
     $24,731 x 0.20 = $4,946.20
    Step 4: Compare the amount from Step 2 with the amount from Step 3. 
The lower of the two will be your annual payment amount. In this 
example, you will be paying the amount calculated under Step 2. To 
determine your monthly repayment amount, divide the annual amount by 
12.
     $1,751.59 / 12 = $145.97

    Example 2. In this example, you are married. You and your spouse 
have a combined AGI of $64,819 and are repaying your loans jointly 
under the ICR plan. You have no children. You have a Direct Loan 
balance of $10,000, and your spouse has a Direct Loan balance of 
$15,000. Your interest rate is 8.25 percent. (The 8.25 percent 
interest rate used in this example is the maximum interest rate that 
may be charged for all Direct Loans excluding Direct PLUS Loans and 
certain Direct PLUS Consolidation Loans; your actual interest rate 
may be lower.)

    Step 1: Add your and your spouse's Direct Loan balances together to 
determine your aggregate loan balance:
     $10,000 + $15,000 = $25,000
    Step 2: Determine the annual payment based on what you would pay 
over 12 years using standard amortization. To do this, multiply your 
aggregate loan balance by the constant multiplier for 8.25 percent 
interest (0.131545). You can view the constant multiplier chart at the 
end of this notice to determine the constant multiplier that you should 
use for the interest rate on your loan. If your exact interest rate is 
not listed, use the next highest rate for estimation purposes.
     0.131545 x $25,000 = $3,288.63
    Step 3: Multiply the result of Step 2 by the income percentage 
factor shown in the income percentage factors table that corresponds to 
your and your spouse's income and then divide the result by 100 (if 
your and your spouse's aggregate income is not listed in the income 
percentage factors table, calculate the applicable income percentage 
factor by following the instructions under the ``Interpolation'' 
heading later in this notice):
     109.40 x $3,288.63 / 100 = $3,597.76
    Step 4: Determine 20 percent of your discretionary income. To do 
this, subtract the poverty level for a family of two, as published in 
the Federal Register on February 18, 2005 (70 FR 8373), from your 
combined AGI and multiply the result by 20 percent:
     $64,819 - $12,830 = $51,989
     $51,989 x 0.20 = $10,397.80
    Step 5: Compare the amount from Step 3 with the amount from Step 4. 
The lower of the two will be your annual payment amount. You and your 
spouse will pay the amount calculated under Step 3. To determine your 
monthly repayment amount, divide the annual amount by 12.
     $3,597.76 / 12 = $299.81
    Interpolation: If your income does not appear on the income 
percentage factors table, you will have to calculate the income 
percentage factor through interpolation. For example, assume you are 
single and your income is $25,000.
    Step 1: Find the closest income listed that is less than your 
income of $25,000 and the closest income listed that is greater than 
your income of $25,000.
    Step 2: Subtract the lower amount from the higher amount (for this 
discussion, we will call the result the ``income interval''):
     $27,308-$22,951 = $4,357
    Step 3: Determine the difference 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''):
     80.33% - 71.89% = 8.44%
    Step 4: Subtract from your income the closest income shown on the 
chart that is less than your income of $25,000:
     $25,000 - $22,951 = $2,049
    Step 5: Divide the result of Step 4 by the income interval 
determined in Step 2:
     $2,049 / $4,357 = 0.4703
    Step 6: Multiply the result of Step 5 by the income percentage 
factor interval:
     8.44% x 0.4703 = 3.9693%
    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 $25,000 in income:
     3.9693 + 71.89% = 75.86% (rounded to the nearest 
hundredth)
    The result is the income percentage factor that will be used to 
calculate the monthly repayment amount under the ICR plan.

                                       Income Percentage Factors for 2005
                                            (Based on annual income)
----------------------------------------------------------------------------------------------------------------
                                     Single                                          Married/head of household
----------------------------------------------------------------------------------------------------------------
                                                                      Factor                          Factor
                             Income                                  (percent)        Income         (percent)
----------------------------------------------------------------------------------------------------------------
8,967...........................................................           55.00           8,967           50.52
12,338..........................................................           57.79          14,149           56.68
15,876..........................................................           60.57          16,862           59.56
19,495..........................................................           66.23          22,043           67.79
22,951..........................................................           71.89          27,308           75.22
27,308..........................................................           80.33          34,301           87.61
34,301..........................................................           88.77          43,018          100.00
43,019..........................................................          100.00          51,739          100.00
51,739..........................................................          100.00          64,819          109.40
62,184..........................................................          111.80          86,614          125.00
79,624..........................................................          123.50         117,131          140.60
112,773.........................................................          141.20         163,813          150.00
129,305.........................................................          150.00         267,682          200.00
230,315.........................................................          200.00  ..............  ..............
----------------------------------------------------------------------------------------------------------------


           Constant Multiplier Chart for 12-Year Amortization
------------------------------------------------------------------------
                                                              Annual
                Interest rate  (percent)                     constant
                                                            multiplier
------------------------------------------------------------------------
2.875...................................................        0.098632

[[Page 35069]]

 
3.500...................................................        0.102174
4.000...................................................        0.105063
4.500...................................................        0.108001
5.000...................................................        0.110987
5.500...................................................        0.114021
6.000...................................................        0.117102
6.500...................................................        0.120231
7.000...................................................        0.123406
7.500...................................................        0.126627
8.250...................................................        0.131545
------------------------------------------------------------------------

BILLING CODE 4000-01-P

[[Page 35070]]

[GRAPHIC] [TIFF OMITTED] TN16JN05.010


[[Page 35071]]


[GRAPHIC] [TIFF OMITTED] TN16JN05.011

[FR Doc. 05-11922 Filed 6-15-05; 8:45 am]
BILLING CODE 4000-01-C