[Federal Register Volume 71, Number 124 (Wednesday, June 28, 2006)]
[Notices]
[Pages 36758-36763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5772]


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

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 2006.

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

SUMMARY: The Secretary announces the annual updates to the ICR plan 
formula for 2006. 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, and Direct 
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 2006 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, 2006 to June 30, 2007.

FOR FURTHER INFORMATION CONTACT: Don Watson, U.S. Department of 
Education, room 114I2, 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.

[[Page 36759]]

    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, and 
Direct 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 2005 to December 
2006. 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 23, 2006.
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 6.80 
percent, and you have an adjusted gross income (AGI) of $35,260. (The 
6.80 percent interest rate used in this example is a fixed interest 
rate that is charged on all Direct Loans, excluding Direct PLUS Loans 
and certain Direct PLUS Consolidation Loans, disbursed on or after July 
1, 2006; your actual interest rate may be less than or greater than 
6.80 percent.)
    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 6.80 percent interest 
(0.122130). 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.

 0.122130 x $15,000 = $1,831.95.

    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 $1,831.95 / 100 = $1,626.22.

    Step 3: Determine 20 percent of your discretionary income (your 
discretionary income is your AGI minus the U.S. Department of Health 
and Human Services (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 January 
24, 2006 (71 FR 3848), from your AGI and multiply the result by 20 
percent:

 $35,260 - $9,800 = $25,460.
 $25,460 x 0.20 = $5,092.00.

    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.

 $1,626.22 / 12 = $135.52.

    Example 2. In this example, you are married. You and your spouse 
have a combined AGI of $66,631 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 6.80 percent. (The 6.80 percent interest 
rate used in this example is a fixed interest rate that is charged on 
all Direct Loans, excluding Direct PLUS Loans and certain Direct PLUS 
Consolidation Loans, disbursed on or after July 1, 2006; your actual 
interest rate may be less than or greater than 6.80 percent.)
    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 
loan balance by the constant multiplier for 6.80 percent interest 
(0.122130). 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.

     0.122130 x $25,000 = $3,053.25.

    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 $3,053.25 / 100 = $3,340.26.

    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 January 24, 2006 (71 FR 3848), from your 
combined AGI and multiply the result by 20 percent:

 $66,631 - $13,200 = $53,431.00.
 $53,431.00 x 0.20 = $10,686.20.

    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

[[Page 36760]]

monthly repayment amount, divide the annual amount by 12.

 $3,340.26 / 12 = $278.36.

    Example 3. 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 $28,071. (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 that were disbursed 
before July 1, 2006; 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):

 80.33 x $1,973.18 / 100 = $1,585.06.

    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 January 24, 2006 (71 FR 3848), from your AGI and multiply the result 
by 20 percent:

 $28,071 - $9,800 = $18,271.
 $18,271 x 0.20 = $3,654.20.

    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.

 $1,585.06 / 12 = $132.09.

    Example 4. In this example, you are married. You and your spouse 
have a combined AGI of $53,185 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 that were disbursed before July 1, 
2006; 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):

 100.00 x $3,288.63 / 100 = $3,288.63.

    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 January 24, 2006 (71 FR 3848), from your 
combined AGI and multiply the result by 20 percent:

 $53,185 - $13,200 = $39,985.
 $39,985 x 0.20 = $7,997.

    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.

 $3,288.63 / 12 = $274.05.

    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: Find the closest income listed that is less than your 
income of $30,000 and the closest income listed that is greater than 
your income of $30,000.
    Step 2: Subtract the lower amount from the higher amount (for this 
discussion, we will call the result the ``income interval''):

 $35,260 - $28,071 = $7,189.

    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''):

 88.77% - 80.33% = 8.44%.

    Step 4: Subtract from your income the closest income shown on the 
chart that is less than your income of $30,000:

 $30,000 - $28,071 = $1,929.

    Step 5: Divide the result of Step 4 by the income interval 
determined in Step 2:

 $1,929 / $7,189 = 0.2683.

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

 8.44% x 0.2683 = 2.2645%.

    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 $30,000 in income:

 2.2645% + 80.33% = 82.59% (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.

[[Page 36761]]



                                       Income Percentage Factors for 2006
                                            [Based on annual income]
----------------------------------------------------------------------------------------------------------------
                            Single                                          Married/head of household
----------------------------------------------------------------------------------------------------------------
                                                    Factor                                            Factor
                    Income                        (percent)                  Income                  (percent)
----------------------------------------------------------------------------------------------------------------
9,218........................................           55.00   9,218...........................           50.52
12,683.......................................           57.79   14,544..........................           56.68
16,320.......................................           60.57   17,333..........................           59.56
20,040.......................................           66.23   22,659..........................           67.79
23,592.......................................           71.89   28,071..........................           75.22
28,071.......................................           80.33   35,260..........................           87.61
35,260.......................................           88.77   44,220..........................          100.00
44,221.......................................          100.00   53,185..........................          100.00
53,185.......................................          100.00   66,631..........................          109.40
63,922.......................................          111.80   89,035..........................          125.00
81,849.......................................          123.50   120,404.........................          140.60
115,925......................................          141.20   168,391.........................          150.00
132,919......................................          150.00   275,163.........................          200.00
236,752......................................          200.00
----------------------------------------------------------------------------------------------------------------


           Constant Multiplier Chart for 12-Year Amortization
------------------------------------------------------------------------
                                                         Annual constant
                Interest rate (percent)                    multiplier
------------------------------------------------------------------------
3.500.................................................          0.102174
4.000.................................................          0.105063
4.500.................................................          0.108001
5.000.................................................          0.110987
5.500.................................................          0.114021
6.000.................................................          0.117102
6.800.................................................          0.122130
7.000.................................................          0.123406
7.900.................................................          0.129237
8.000.................................................          0.129894
8.250.................................................          0.131545
------------------------------------------------------------------------


[[Page 36762]]

[GRAPHIC] [TIFF OMITTED] TN28JN06.006


[[Page 36763]]

[GRAPHIC] [TIFF OMITTED] TN28JN06.007

[FR Doc. 06-5772 Filed 6-27-06; 8:45 am]
BILLING CODE 4000-01-C