[Federal Register Volume 88, Number 80 (Wednesday, April 26, 2023)]
[Notices]
[Pages 25388-25392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08770]


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DEPARTMENT OF EDUCATION


Annual Updates to the Income-Contingent Repayment (ICR) Plan 
Formula for 2023--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 2023 to give notice to borrowers and the public regarding 
how monthly ICR payment amounts will be calculated for the 2023-2024 
year under the William D. Ford Federal Direct Loan (Direct Loan) 
Program, Assistance Listing 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, 2023, 
to June 30, 2024, for any borrower who enters the ICR plan or has a 
monthly payment

[[Page 25389]]

amount under the ICR plan recalculated during that period.

FOR FURTHER INFORMATION CONTACT: Travis Sturlaugson, U.S. Department of 
Education, 830 First Street NE, Washington, DC 20202. Telephone: 202-
377-4174. Email: [email protected].
    If you are deaf, hard of hearing, or have a speech disability and 
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION: Under the Direct Loan Program, borrowers may 
choose to repay their non-defaulted 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 monthly payment amount on the borrower's 
Adjusted Gross Income (AGI), 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 that 
provide a monthly payment amount based on the borrower's income and 
family size. The other income-driven repayment plans are 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 generally result in lower payment amounts than the ICR 
plan.
    A Direct Loan borrower who repays under the ICR plan pays the 
lesser of: (1) the monthly amount that would be required over a 12-year 
repayment period with fixed payments, multiplied by an income 
percentage factor; or (2) 20 percent of their discretionary income.
    We adjust the income percentage factors annually to reflect changes 
in inflation and announce the adjusted factors in the Federal Register, 
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 annual income documentation, as required under the ICR 
plan. This notice contains the adjusted income percentage factors for 
2023, examples of how the monthly ICR payment amount 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 2023
 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 17, 2022 (87 FR 50615). 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 2022 and December 2023.
    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: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document in an accessible format. The Department will 
provide the requestor with an accessible format that may include Rich 
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, 
braille, large print, audiotape, or compact disc, or other accessible 
format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. 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 Portable Document Format (PDF). To 
use PDF, you must have Adobe Acrobat Reader, which is available free at 
this 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.

Richard Cordray,
Chief Operating Officer, Federal Student Aid.

Attachment 1--Income Percentage Factors for 2023

                                       Income Percentage Factors for 2023
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                            Single                                          Married/head of household
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                    AGI                           % Factor                    AGI                   % Factor
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$13,367....................................             55.00   $13,367.......................             50.52
$18,392....................................             57.79   $21,090.......................             56.68
$23,666....................................             60.57   $25,132.......................             59.56
$29,059....................................             66.23   $32,857.......................             67.79
$34,209....................................             71.89   $40,705.......................             75.22
$40,705....................................             80.33   $51,125.......................             87.61
$51,125....................................             88.77   $64,119.......................            100.00
$64,120....................................            100.00   $77,120.......................            100.00
$77,120....................................            100.00   $96,618.......................            109.40
$92,687....................................            111.80   $129,104......................            125.00
$118,682...................................            123.50   $174,590......................            140.60
$168,095...................................            141.20   $244,172......................            150.00
$192,736...................................            150.00   $398,995......................            200.00
$343,296...................................            200.00   ..............................  ................
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[[Page 25390]]

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 ``Loan Simulator'' and is available at studentaid.gov/loan-simulator. Based on information entered 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 loan was 
first disbursed.
     The Poverty Guideline amounts used in the examples are 
from the 2023 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 2023 were published in the Federal 
Register on January 19, 2023 (88 FR 3424).
     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 
determine a joint ICR payment amount based on the combined outstanding 
balances of each borrower's Direct Loans and the combined AGIs of both 
borrowers. 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 Briana, has a 
total outstanding Direct Loan debt of $60,000, of which $40,000 belongs 
to John and $20,000 to Briana, we would apportion 67 percent of the 
monthly ICR payment to John and the remaining 33 percent to Briana. 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 loan entered repayment;
 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 expressed 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 expressed 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.

 0.06 / 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. In each of the examples, the Direct Loan 
amounts represent the outstanding principal balance at the time the 
loans entered repayment.
    Example 1. Kesha is single with no dependents and has $15,000 in 
Direct Subsidized and Unsubsidized Loans. The interest rate on Kesha's 
loans is 6 percent, and she has an AGI of $34,209.
    Step 1: Determine the total monthly payment amount based on what 
Kesha 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 Kesha's AGI. In this example, an 
AGI of $34,209 corresponds to an income percentage factor of 71.89 
percent.

 0.7189 x $146.38 = $105.23

    Step 3: Now, determine the monthly payment amount equal to 20 
percent of Kesha's 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 HHS Poverty Guideline 
amount for a family of one from Kesha's AGI, multiply the result by 20 
percent, and then divide by 12:

 $34,209-$14,580 = $19,629
 $19,629 x 0.20 = $3,925.80
 $3,925.80 / 12 = $327.15

    Step 4: Compare the amount from Step 2 with the amount from Step 3. 
In this example, Kesha would pay the amount calculated under Step 2 
($105.23), since this is the lesser of the two payment amounts.
    Note: In this example, Kesha would have a slightly higher payment 
under the ICR Plan than under the PAYE or REPAYE plan, but the ICR 
monthly payment would be lower than what Kesha would pay under the IBR 
Plan. Specifically, Kesha's monthly payment would be $102.83 under the 
PAYE and REPAYE plans, and $154.24 under the IBR plan.
    Example 2. Paul is married to Jesse and they have no dependents. 
They file their Federal income tax return jointly. Paul has a Direct 
Loan balance of $10,000, and Jesse has a Direct Loan balance of 
$15,000. Each of their Direct Loans has an interest rate of 6 percent.
    Paul and Jesse have a combined AGI of $96,618 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

[[Page 25391]]

``General notes about the examples in this attachment'').
    Step 1: Add Paul's and Jesse'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 Paul and 
Jesse 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, their 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 Paul and Jesse's combined AGI. In 
this example, the combined AGI of $96,618 corresponds to an income 
percentage factor of 109.40 percent.

 1.094 x $243.96 = $266.90

    Step 4: Now, determine the monthly payment amount equal to 20 
percent of Paul and Jesse'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:

 $96,618-$19,720 = $76,898
 $76,898 x 0.20 = $15,379.60
 $15,379.60 / 12 = $1,281.63

    Step 5: Compare the amount from Step 3 with the amount from Step 4. 
Paul and Jesse would jointly pay the amount calculated under Step 3 
($266.90), since this is the lesser of the two amounts.
    Note: For Paul and Jesse, the ICR plan provides the lowest monthly 
payment of any income-driven repayment plan available. Paul and Jesse 
would not be eligible for the IBR or PAYE plans, and they would have a 
combined monthly payment under the REPAYE plan of $558.65.
    Step 6: Because Paul and Jesse are jointly repaying their Direct 
Loans under the ICR plan, the monthly payment amount calculated under 
Step 5 applies to Paul's and Jesse's combined 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. Paul has a Direct Loan debt of $10,000 and Jesse has a 
Direct Loan debt of $15,000. For Paul, the monthly payment amount will 
be:

 $10,000 / ($10,000 + $15,000) = 40 percent
 0.40 x $266.90 = $106.76

    For Jesse, the monthly payment amount will be:

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

    Example 3. Santiago is single with no dependents and has a combined 
balance of $60,000 in Direct Subsidized and Unsubsidized Loans. Each of 
Santiago's loans has an interest rate of 6 percent, and Santiago's AGI 
is $40,705.
    Step 1: Determine the total monthly payment amount based on what 
Santiago 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 Santiago's AGI. In this example, an 
AGI of $40,705 corresponds to an income percentage factor of 80.33 
percent.

 0.8033 x $585.51 = $470.34

    Step 3: Now, determine the monthly payment amount equal to 20 
percent of Santiago's 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 HHS Poverty Guideline 
amount for a family of one from Santiago's AGI, multiply the result by 
20 percent, and then divide by 12:

 $40,705-$14,580 = $26,125
 $26,125 x 0.20 = $5,225
 $5,225 / 12 = $435.42

    Step 4: Compare the amount from Step 2 with the amount from Step 3. 
In this example, Santiago would pay the amount calculated under Step 3 
($435.42), since this is the lesser of the two amounts.
    Note: Santiago would have a lower payment under each of the other 
income-driven plans. Specifically, Santiago's payment would be $156.96 
under the PAYE and REPAYE plans and $235.44 under the IBR plan.
    Interpolation. If an AGI is not included on the income percentage 
factor table, calculate the income percentage factor through linear 
interpolation. For example, assume that Jocelyn is single with an AGI 
of $50,000.
    Step 1: Find the closest AGI listed that is less than Jocelyn's AGI 
of $50,000 ($40,705) and the closest AGI listed that is greater than 
Jocelyn's AGI of $50,000 ($51,125).
    Step 2: Subtract the lower amount from the higher amount (for this 
discussion we will call the result the ``income interval''):

 $51,125-$40,705 = $10,420

    Step 3: Determine the difference between the two income percentage 
factors that correspond to the AGIs used in Step 2 (for this 
discussion, we will call the result the ``income percentage factor 
interval''):

 88.77 percent-80.33 percent = 8.44 percent

    Step 4: Subtract from Jocelyn's AGI the closest AGI shown on the 
chart that is less than Jocelyn's AGI of $50,000:

 $50,000-$40,705 = $9,295

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

 $9,295 / $10,420 = 89.20 percent

    Step 6: Multiply the result of Step 5 by the income percentage 
factor interval that was calculated in Step 3:

 8.44 percent x 89.20 percent = 7.53 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 an AGI of $50,000:

 7.53 percent + 80.33 percent = 87.86 percent (rounded to the 
nearest hundredth)

    The result is the income percentage factor that we will use to 
calculate Jocelyn'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 AGIs under each 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 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 AGI, loan debt, and family size.

[[Page 25392]]



                                            Sample First-Year Monthly Repayment Amounts for a Single Borrower
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                                                                     Family Size = 1
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                                                                                                                AGI
               Initial debt                             Plan             -------------------------------------------------------------------------------
                                                                              $20,000         $40,000         $60,000         $80,000        $100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
$20,000...................................  ICR.........................              90             155             188             199             225
                                            IBR.........................               0  ..............  ..............  ..............  ..............
                                            PAYE........................               0             151  ..............  ..............  ..............
                                            REPAYE......................               0             151             318             484             651
                                            10-Year Standard............             222             222             222             222             222
$40,000...................................  ICR.........................              90             310             376             399             449
                                            IBR.........................               0             227  ..............  ..............  ..............
                                            PAYE........................               0             151             318  ..............  ..............
                                            REPAYE......................               0             151             318             484             651
                                            10-Year Standard............             444             444             444             444             444
$60,000...................................  ICR.........................              90             424             565             598             674
                                            IBR.........................               0             227             477  ..............  ..............
                                            PAYE........................               0             151             318             484             651
                                            REPAYE......................               0             151             318             484             651
                                            10-Year Standard............             666             666             666             666             666
$80,000...................................  ICR.........................              90             424             753             798             898
                                            IBR.........................               0             227             477             727  ..............
                                            PAYE........................               0             151             318             484             651
                                            REPAYE......................               0             151             318             484             651
                                            10-Year Standard............             888             888             888             888             888
$100,000..................................  ICR.........................              90             424             757             997           1,123
                                            IBR.........................               0             227             477             727             977
                                            PAYE........................               0             151             318             484             651
                                            REPAYE......................               0             151             318             484             651
                                            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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                                                                                                                AGI
               Initial debt                             Plan             -------------------------------------------------------------------------------
                                                                              $20,000         $40,000         $60,000         $80,000        $100,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
$20,000...................................  ICR.........................              $0            $146            $188            $198            $217
                                            IBR.........................               0              34  ..............  ..............  ..............
                                            PAYE........................               0              23             189  ..............  ..............
                                            REPAYE......................               0              23             189             356             523
                                            10-Year Standard............             222             222             222             222             222
$40,000...................................  ICR.........................               0             252             375             396             433
                                            IBR.........................               0              34             284  ..............  ..............
                                            PAYE........................               0              23             189             356  ..............
                                            REPAYE......................               0              23             189             356             523
                                            10-Year Standard............             444             444             444             444             444
$60,000...................................  ICR.........................               0             252             563             594             650
                                            IBR.........................               0              34             284             534  ..............
                                            PAYE........................               0              23             189             356             523
                                            REPAYE......................               0              23             189             356             523
                                            10-Year Standard............             666             666             666             666             666
$80,000...................................  ICR.........................               0             252             586             792             867
                                            IBR.........................               0              34             284             534             784
                                            PAYE........................               0              23             189             356             523
                                            REPAYE......................               0              23             189             356             523
                                            10-Year Standard............             888             888             888             888             888
$100,000..................................  ICR.........................               0             252             586             919           1,083
                                            IBR.........................               0              34             284             534             784
                                            PAYE........................               0              23             189             356             523
                                            REPAYE......................               0              23             189             356             523
                                            10-Year Standard............           1,110           1,110           1,110           1,110           1,110
--------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 2023-08770 Filed 4-25-23; 8:45 am]
BILLING CODE 4000-01-P