[Federal Register Volume 84, Number 99 (Wednesday, May 22, 2019)]
[Notices]
[Pages 23539-23543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10623]


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DEPARTMENT OF EDUCATION


Annual Updates to the Income Contingent Repayment (ICR) Plan 
Formula for 2019--William D. Ford Federal Direct Loan Program

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 2019 to give notice to borrowers and the public regarding 
how monthly ICR payment amounts will be calculated for the 2019-2020 
year under the William D. Ford Federal Direct Loan (Direct Loan) 
Program, Catalog of Federal Domestic Assistance number 84.063.

DATES: The adjustments to the income percentage factors for the ICR 
plan formula contained in this notice are applicable from July 1, 2019, 
to June 30, 2020, 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. Email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service, toll free, at 1-800-
877-8339.

SUPPLEMENTARY INFORMATION: Under the 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.
    ICR is one of several income-driven repayment plans. Other income-
driven repayment plans include the Income-Based Repayment (IBR) plan, 
the Pay As You Earn Repayment (PAYE) plan, and the Revised Pay As You 
Earn Repayment (REPAYE) plan. The IBR, PAYE, and REPAYE plans provide 
lower payment amounts than the ICR plan for most borrowers.
    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, as 
required by 34 CFR 685.209(b)(1)(ii)(A). 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 2019, 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:

 Attachment 1--Income Percentage Factors for 2019
 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 updated the 
income percentage factors that were published in the Federal Register 
on August 2, 2018 (83 FR 37802). 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 2018 and December 2019.
    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. 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.
    Electronic Access to This Document: The official version of this 
document is

[[Page 23540]]

the document published in the Federal Register. You may access the 
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Regulations at www.govinfo.gov. At this site, you can view this 
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by the Department.

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

Mark A. Brown,
Chief Operating Officer, Federal Student Aid.

Attachment 1--Income Percentage Factors for 2019

                                       Income Percentage Factors for 2019
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                            Single                                          Married/head of household
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                   Income                         % Factor                  Income                  % Factor
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$12,147....................................             55.00   $12,147.......................             50.52
$16,714....................................             57.79   $19,165.......................             56.68
$21,506....................................             60.57   $22,839.......................             59.56
$26,407....................................             66.23   $29,858.......................             67.79
$31,087....................................             71.89   $36,989.......................             75.22
$36,989....................................             80.33   $46,460.......................             87.61
$46,460....................................             88.77   $58,268.......................            100.00
$58,269....................................            100.00   $70,081.......................            100.00
$70,081....................................            100.00   $87,800.......................            109.40
$84,229....................................            111.80   $117,322......................            125.00
$107,852...................................            123.50   $158,657......................            140.60
$152,755...................................            141.20   $221,889......................            150.00
$175,147...................................            150.00   $362,583......................            200.00
$311,967...................................            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 amounts would be under the ICR plan. The calculator 
is called the ``Repayment Estimator'' and is available at 
StudentAid.gov/repayment-estimator. Based on information inputted into 
the calculator by the borrower (for example, income, family size, and 
tax filing status), 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 2019 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 2019 were published in the Federal 
Register on February 1, 2019 (84 FR 1167).
     All of the examples use an income percentage factor 
corresponding to an adjusted gross income (AGI) in the table in 
Attachment 1. If an AGI is not listed in the income percentage factors 
table in Attachment 1, the applicable income percentage can be 
calculated 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}  [supcaret]-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 percent, 
0.06); and
 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 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 percent. As a decimal, 6 percent is 
0.06.

 0.06 / 12 = 0.005

    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

[[Page 23541]]

amount under the ICR plan, the applicable figure is 12 years, which is 
144 months. Finally, subtract the result from one.

 0.06 / 12 = 0.005
 1 + 0.005 = 1.005
 1.005 [supcaret] -144 = 0.48762628
 1-0.48762628 = 0.51237372

    Step 3: Next, resolve the fraction by dividing the result from Step 
1 by the result from Step 2.

 0.005 / 0.51237372 = 0.0097585

    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 0.0097585 = $97.59

    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 percent, and she has an AGI of $31,087.
    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 $146.38.
    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 $31,087 corresponds to an income percentage factor of 71.89 
percent.

 0.7189 x $146.38 = $105.23

    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:

 $31,087-$12,490 = $18,597
 $18,597 x 0.20 = $3,719.40
 $3,719.40 / 12 = $309.95

    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 
($105.23).

    Note: Brenda would have a lower payment under other income-
driven repayment plans. Specifically, Brenda's payment would be 
$102.93 under the PAYE and REPAYE plans. However, Brenda's payment 
would be $154.40 under the IBR plan, which is higher than the 
payment she would have under the ICR plan.

    Example 2. Joseph is married to Susan and has no dependents. They 
file their Federal income tax return jointly. 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 percent.
    Joseph and Susan have a combined AGI of $87,800 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 $243.96.
    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 $87,800 corresponds to an income 
percentage factor of 109.40 percent.

 1.094 x $243.96 = $266.90

    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 then 
divide by 12:

 $87,800-$16,910 = $70,890
 $70,890 x 0.20 = $14,178.00
 $14,178.00 / 12 = $1,181.50

    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 ($266.90).

    Note: For Joseph and Susan, the ICR plan provides the lowest 
monthly payment of all of the income-driven repayment plans. Joseph 
and Susan would not be eligible for the IBR or PAYE plans, and would 
have a combined monthly payment under the REPAYE plan of $520.29.

    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's 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 $266.90 = $106.76

    For Susan, the monthly payment amount will be:

 $15,000 / ($10,000 + $15,000) = 60 percent
 0.60 x $266.90 = $160.14

    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 percent, and David's AGI is $36,989.
    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 $585.51.
    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 $36,989 corresponds to an income percentage factor of 80.33 
percent.

 0.8033 x $585.51 = $470.34

    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, and then divide by 
12:

 $36,989 - $12,490 = $24,499.00
 $24,499 x 0.20 = $4,899.80
 $4,899.90 / 12 = $408.32

    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 
($408.32).

    Note: David would have a lower payment under each of the other 
income-driven plans. Specifically, David's payment would be $152.12 
under the PAYE and REPAYE plans and $228.18 under the IBR plan.



[[Page 23542]]


    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 of $50,000 ($46,460) and the closest income listed that is 
greater than Joan's income of $50,000 ($58,269).
    Step 2: Subtract the lower amount from the higher amount (for this 
discussion we will call the result the ``income interval''):

 $58,269-$46,460 = $11,809

    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-$46,460 = $3,540

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

 $3,540 / $11,809 = 29.98 percent

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

 11.23 percent x 29.98 percent = 3.37 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:

 3.37 percent + 88.77 percent = 92.14 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 Income-Driven Repayment Amounts for 
Single and Married Borrowers

    Below are two charts that provide first-year payment amount 
estimates for a variety of loan debt sizes and incomes under all of the 
income-driven repayment plans and the 10-Year Standard Repayment Plan. 
The first chart is for single borrowers who have a family size of one. 
The second chart is for a borrower who is married or a head of 
household and who has a family size of three. The calculations in 
Attachment 3 assume that the loan debt has an interest rate of 6 
percent. For married borrowers, the calculations assume that the 
borrower files a joint Federal income tax return with his or her spouse 
and that the borrower's spouse does not have Federal student loans. A 
field with a ``-'' character indicates that the borrower in the example 
would not be eligible to enter the applicable income-driven repayment 
plan based on the borrower's income, loan debt, and family size.

                                            Sample First-Year Monthly Repayment Amounts for a Single Borrower
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                                                                     Family Size = 1
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                                        Income              Plan              $20,000         $40,000         $60,000         $80,000        $100,000
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Initial Debt......................         $20,000  ICR.................            $117            $162            $195            $211            $233
                                                    IBR.................              16  ..............  ..............  ..............  ..............
                                                    PAYE................              11             177  ..............  ..............  ..............
                                                    REPAYE..............              11             177             344             511             677
                                                    10-Year Standard....             222             222             222             222             222
                                            40,000  ICR.................             125             324             344             423             472
                                                    IBR.................              16             266  ..............  ..............  ..............
                                                    PAYE................              11             177             344  ..............  ..............
                                                    REPAYE..............              11             177             344             511             682
                                                    10-Year Standard....             444             444             444             444             444
                                            60,000  ICR.................             125             459             586             634             700
                                                    IBR.................              16             266             516  ..............  ..............
                                                    PAYE................              11             177             344             511  ..............
                                                    REPAYE..............              11             177             344             511             677
                                                    10-Year Standard....             666             666             666             666             666
                                            80,000  ICR.................             125             459             781             845             934
                                                    IBR.................              16             266             516             766  ..............
                                                    PAYE................              11             177             344             511             677
                                                    REPAYE..............              11             177             344             511             677
                                                    10-Year Standard....             888             888             888             888             888
                                           100,000  ICR.................             125             459             792           1,057           1,167
                                                    IBR.................              16             266             516             766           1,016
                                                    PAYE................              11             177             344             511             677
                                                    REPAYE..............              11             177             344             511             677
                                                    10-Year Standard....           1,110           1,110           1,110           1,110           1,110
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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              Plan              $20,000         $40,000         $60,000         $80,000        $100,000
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Initial Debt......................         $20,000  ICR.................              $0            $154            $195            $205            $226
                                                    IBR.................               0             100  ..............  ..............  ..............
                                                    PAYE................               0              67  ..............  ..............  ..............
                                                    REPAYE..............               0              67             233             400             567
                                                    10-Year Standard....             222             222             222             222             222
                                            40,000  ICR.................               0             309             390              15             457

[[Page 23543]]

 
                                                    IBR.................               0             100             350  ..............  ..............
                                                    PAYE................               0              67             233             400  ..............
                                                    REPAYE..............               0              67             233             400             574
                                                    10-Year Standard....             444             444             444             444             444
                                            60,000  ICR.................               0             320             586             622             686
                                                    IBR.................               0             100             350             600  ..............
                                                    PAYE................               0              67             233             400             574
                                                    REPAYE..............               0              67             233             400             574
                                                    10-Year Standard....             666             666             666             666             666
                                            80,000  ICR.................               0             311             645             822             904
                                                    IBR.................               0             100             350             600             850
                                                    PAYE................               0              67             233             400             567
                                                    REPAYE..............               0              67             233             400             567
                                                    10-Year Standard....             888             888             888             888             888
                                           100,000  ICR.................               0             311             645             978           1,131
                                                    IBR.................               0             100             350             600             850
                                                    PAYE................               0              67             233             400             567
                                                    REPAYE..............               0              67             233             400             567
                                                    10-Year Standard....           1,110           1,110           1,110           1,110           1,110
--------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 2019-10623 Filed 5-21-19; 8:45 am]
 BILLING CODE 4000-01-P