[Federal Register Volume 80, Number 57 (Wednesday, March 25, 2015)]
[Notices]
[Pages 15757-15760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06704]
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DEPARTMENT OF EDUCATION
Annual Updates to the Income Contingent Repayment (ICR) Plan
Formula for 2015--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 2015, as required by 34 CFR 685.209(b)(1)(ii)(A), to give
notice to Direct Loan borrowers and the public regarding how monthly
ICR payment amounts will be calculated for the 2015-2016 year.
DATES: The adjustments to the income percentage factors for the ICR
plan formula contained in this notice are effective from July 1, 2015,
to June 30, 2016, 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 113H2, Washington, DC 20202.
Telephone: (202) 377-3681 or by email: [email protected].
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 non-defaulted 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 2015, 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:
[[Page 15758]]
Attachment 1--Income Percentage Factors for 2015
Attachment 2--Examples of the Calculations of Monthly
Repayment Amounts
Attachment 3--Charts Showing Sample Repayment 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 the Federal
Register on April 21, 2014 (79 FR 22107). 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 between the not-seasonally-adjusted Consumer Price Index for all
urban consumers for December 2014 and December 2015.
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. 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: March 19, 2015.
James W. Runcie,
Chief Operating Officer, Federal Student Aid.
Attachment 1--Income Percentage Factors for 2015
Income Percentage Factors for 2015
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Single Married/head of household
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Income % Factor Income % Factor
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$11,150 55.00 $11,150 50.52
15,342 57.79 17,593 56.68
19,741 60.57 20,965 59.56
24,240 66.23 27,408 67.79
28,537 71.89 33,954 75.22
33,954 80.33 42,648 87.61
42,648 88.77 53,487 100.00
53,488 100.00 64,331 100.00
64,331 100.00 80,596 109.40
77,318 111.80 107,695 125.00
99,003 123.50 145,638 140.60
140,221 141.20 203,682 150.00
160,776 150.00 332,833 200.00
286,370 200.00
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Attachment 2--Examples of the Calculations of Monthly Repayment Amounts
General notes about the examples in this attachment:
We have a calculator that borrowers can use to estimate
what their payment amount would be under the ICR plan. The
calculator is called the ``Repayment Estimator'' and is available at
StudentAid.gov/repayment-estimator. This calculator provides a
detailed, individualized assessment of a borrower's loans and
repayment plan options, including the ICR plan.
The interest rates used in the examples are for
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.
The Poverty Guideline amounts used in the examples are
from the 2015 U.S. Department of Health and Human Services (HHS)
Poverty Guidelines for the 48 contiguous States and the District of
Columbia. Different Poverty Guidelines apply to residents of Alaska
and Hawaii. The Poverty Guidelines for 2015 were published in the
Federal Register on January 22, 2015 (80 FR 3236).
All of the examples use an income percentage factor
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 ``Interpolation''
heading later in this attachment.
Married borrowers may repay their Direct Loans jointly
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.
For example, if a married couple, John and Sally, has a
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:
M = P x <(I / 12) / [1-{1 + (I / 12){time} [caret]-N]>
In the formula--
M is the monthly payment amount;
P is the outstanding principal balance of the loan at
the time the calculation is performed;
I is the annual interest rate on the loan, expressed as
a decimal (for example, for a loan with an interest rate of 6.8
percent, 0.068); and
[[Page 15759]]
N is the total number of months in the repayment period
(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.
0.068 / 12 = 0.005667
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 the result from one.
0.068 / 12 = 0.005667
1 + 0.005667 = 1.005667
1.005667 [caret] -144 = 0.44319544
1-0.44319554 = 0.55680456
Step 3: Next, resolve the fraction by dividing the result from
step one by the result from step two.
0.005667 / 0.55680456 = 0.01017772
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.
$10,000 x 0.01017772 = $101.78
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 $28,537.
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 $28,537 corresponds to an income percentage factor of
71.89 percent.
0.7189 x $152.66 = $109.75
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:
$28,537-$11,770 = $16,767
$16,767 x 0.20 = $3,353.40
$3,353.40 / 12 = $279.45
Step 4: Compare the amount from Step 2 with the amount from Step
3. 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 $80,596 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:
$10,000 + $15,000 = $25,000
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 $80,596 corresponds to an
income percentage factor of 109.40 percent.
1.094 x $254.44 = $278.36
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:
$80,596-$15,930 = $64,666
$64,666 x 0.20 = $12,933.20
$12,933.20 / 12 = $1,077.77
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 5 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:
$10,000 / ($10,000 + $15,000) = 40 percent
0.40 x $278.36 = $111.34
For Susan, the monthly payment amount will be:
$15,000 / ($10,000 + $15,000) = 60 percent
0.60 x $278.36 = $167.02
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 $33,954.
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 $33,954 corresponds to an income percentage factor of
80.33 percent.
0.8033 x $610.66 = $490.54
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:
$33,954-$11,770 = $22,184
$22,184 x 0.20 = $4,436.80
$4,436.80 / 12 = $369.73
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 ($369.73).
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''):
$53,488-$42,648 = $10,840
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''):
100.00 percent-88.77 percent = 11.23 percent
Step 4: Subtract from Joan's income the closest income shown on
the chart that is less than Joan's income of $50,000:
$50,000-$42,648 = $7,352
Step 5: Divide the result of Step 4 by the income interval
determined in Step 2:
$7,352 / $10,840 = 67.82 percent
Step 6: Multiply the result of Step 5 by the income percentage
factor interval:
11.23 percent x 67.82 percent = 7.62 percent
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:
[[Page 15760]]
7.62 percent + 88.77 percent = 96.39 percent (rounded to
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.
Attachment 3--Charts Showing Sample Repayment Amounts for Single and
Married Borrowers
Sample First-Year Monthly Repayment Amounts for a Single Borrower
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Family Size = 1
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Income Initial debt
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$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000
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$10,000.................................. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
20,000................................... 63 126 137 137 137 137 137 137 137 137
30,000................................... 78 155 233 304 304 304 304 304 304 304
40,000................................... 89 179 268 358 447 471 471 471 471 471
50,000................................... 100 201 301 401 502 602 637 637 637 637
60,000................................... 102 204 305 407 509 611 712 804 804 804
70,000................................... 110 220 329 439 549 659 769 878 971 971
80,000................................... 117 234 351 469 586 703 820 937 1,054 1,137
90,000................................... 123 246 369 492 614 737 860 983 1,106 1,229
100,000.................................. 128 256 384 512 640 768 896 1,024 1,152 1,280
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Sample First-Year Monthly Repayment Amounts for a Married or Head-of-Household Borrower
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Family Size = 3
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Income Initial debt
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$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000
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$10,000.................................. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
20,000................................... 0 0 0 0 0 0 0 0 0 0
30,000................................... 73 147 165 165 165 165 165 165 165 165
40,000................................... 88 176 263 332 332 332 332 332 332 332
50,000................................... 100 200 301 401 499 499 499 499 499 499
60,000................................... 102 204 305 407 509 611 665 665 665 665
70,000................................... 107 214 321 428 534 641 748 832 832 832
80,000................................... 113 226 339 452 565 678 791 904 999 999
90,000................................... 119 238 357 476 596 715 834 953 1,072 1,165
100,000.................................. 125 250 376 501 626 751 877 1,002 1,127 1,252
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[FR Doc. 2015-06704 Filed 3-24-15; 8:45 am]
BILLING CODE 4000-01-P