Annual Updates to the Income Contingent Repayment (ICR) Plan Formula for 2015-William D. Ford Federal Direct Loan Program, 15757-15760 [2015-06704]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 80, Number 57 (Wednesday, March 25, 2015)]
[Notices]
[Pages 15757-15760]
From the Federal Register Online via the Government Printing 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: ian.foss@ed.gov.
    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
                                          --------------------------------------------------------------------------------------------------------------
                  Income                                                                    Initial debt
                                          --------------------------------------------------------------------------------------------------------------
                                            $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
                                          --------------------------------------------------------------------------------------------------------------
                  Income                                                                    Initial debt
                                          --------------------------------------------------------------------------------------------------------------
                                            $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