Publication Date: May 16, 2003

FRPart:

RegPartsAffected:

Page Numbers: 26581-26586

Summary: Notice of the Annual Updates to the Income Contingent Repayment (ICR) Plan Formula for 2003

Posted on 05-16-2003

FR Doc 03-12283[Federal Register: May 16, 2003 (Volume 68, Number 95)]

[Notices]

[Page 26581-26586]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr16my03-56]

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DEPARTMENT OF EDUCATION

William D. Ford Federal Direct Loan Program

AGENCY: Department of Education.

ACTION: Notice of the annual updates to the Income Contingent Repayment

(ICR) plan formula for 2003.

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SUMMARY: The Secretary announces
the annual updates to the ICR plan

formula for 2003. Under the William D. Ford Federal Direct Loan (Direct

Loan) Program, borrowers may choose to repay their student loans under

the ICR plan, which bases the repayment amount on the borrower's

income, family size, loan amount, and interest rate. Each year, we

adjust the formula for calculating a borrower's payment to reflect

changes due to inflation. This notice contains the adjusted income

percentage factors for 2003 and charts showing sample repayment amounts

based on the adjusted ICR plan formula. It also contains examples of

how the calculation of the monthly ICR amount is performed and a

constant multiplier chart for use in performing the calculations. The

adjustments for the ICR plan formula contained in this notice are

effective from July 1, 2003 to June 30, 2004.

FOR FURTHER INFORMATION CONTACT:
Don Watson, U.S. Department of

Education, Room 092B1, UCP, 400 Maryland Avenue, SW., Washington, DC

20202-5400. Telephone: (202) 377-4008. If you use a telecommunications

device for the deaf (TDD), you may call the Federal Information Relay

Service (FIRS) at 1-800-877-8339.

Individuals with disabilities may obtain this document in an

alternative format (e.g., Braille, large print, audiotape, or computer

diskette) on request to the contact person listed in the preceding

paragraph.

SUPPLEMENTARY INFORMATION: Direct
Loan Program borrowers may choose to

repay their Direct Loans under the ICR plan. The attachment to this

notice provides updates to examples of how the calculation of the

monthly ICR amount is performed, the income percentage factors, the

constant multiplier chart, and charts showing sample repayment amounts.

We have updated the income percentage factors to reflect changes

based on inflation. We have revised the income percentage factors table

by changing the dollar amounts of the incomes shown by a percentage

equal to the estimated percentage change in the Consumer Price Index

for all urban consumers from December 2002 to December 2003. Further,

we provide examples of monthly repayment amount calculations and two

charts that show sample repayment amounts for single and married or

head-of-household borrowers at various income and debt levels based on

the updated income percentage factors.

The updated income percentage factors, at any given income, may

cause a borrower's payments to be slightly lower than they were in

prior years. This updated amount more accurately reflects the impact of

inflation on a borrower's current ability to repay.

Electronic Access to This Document

You may review this document,
as well as all other Department of

Education documents published in the Federal Register, in text or Adobe

Portable Document Format (PDF) on the Internet at the following site:

http://www.ed.gov/legislation/FedRegister.

To use PDF, you must have Adobe Acrobat Reader, which is available

free at this site. If you have questions about using PDF, call the U.S.

Government Printing Office (GPO), toll free at 1-888-293-6498; or in

the Washington, DC area at (202) 512-1530.

Note: The official version of this document is the document

published in the Federal Register. Free Internet access to the

official edition of the Federal Register and the Code of Federal

Regulations is available on GPO Access at:

http://www.access.gpo.gov/nara/index.html.

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

Dated: May 13, 2003.

Theresa S. Shaw,

Chief Operating Officer, Federal Student Aid.

Attachment--Examples of the Calculations of Monthly Repayment Amounts

Example 1. This example assumes
you are a single borrower with

$15,000 in Direct Loans, the interest rate being charged is 8.25

percent, and you have an adjusted gross income (AGI) of $33,042.

Step 1: Determine your annual payments based on what you would pay

over 12 years using standard amortization. To do this, multiply your

loan balance by the constant multiplier for 8.25 percent interest

(0.131545). The constant multiplier is a factor used to calculate

amortized payments at a given interest rate over a fixed period of

time. (The 8.25 percent interest rate used in this example is the

maximum interest rate that may be charged for all Direct Loans

excluding Direct PLUS Loans and certain Direct PLUS Consolidation

Loans; your actual interest rate may be lower. You can view the

constant multiplier chart at the end of this notice to determine the

constant multiplier that you should use for the interest rate on your

loan. If your exact interest rate is not listed, use the next highest

for estimation purposes.)

[sbull] 0.131545 x $15,000 = $1,973.18

Step 2: Multiply the result
of Step 1 by the income percentage

factor shown in the income percentage factors table that corresponds to

your income and then divide the result by 100. (If your income is not

listed in the income percentage factors table, calculate the applicable

income percentage factor by following the instructions under the

``Interpolation'' heading later in this notice.):

[sbull] 88.77 x $1,973.18 / 100 = $1,751.59

[[Page 26582]]

Step 3: Determine 20 percent of your discretionary income (your

discretionary income is your AGI minus the HHS Poverty Guideline amount

for your family size). Because you are a single borrower, subtract the

poverty level for a family of one, as published in the Federal Register

on February 7, 2003 (68 FR 6456), from your AGI and multiply the result

by 20 percent:

[sbull] $33,042 - $8,980 = $24,062

[sbull] $24,062 x 0.20 = $4,812.40

Step 4: Compare the amount
from Step 2 with the amount from Step 3.

The lower of the two will be your annual payment amount. In this

example, you will be paying the amount calculated under Step 2. To

determine your monthly repayment amount, divide the annual amount by

12.

[sbull] $1,751.59 / 12 = $145.97

Example 2. In this example,
you are married. You and your spouse

have a combined AGI of $62,439 and are repaying your loans jointly

under the ICR plan. You have no children. You have a Direct Loan

balance of $10,000, and your spouse has a Direct Loan balance of

$15,000. Your interest rate is 8.25 percent.

Step 1: Add your and your spouse's Direct Loan balances together to

determine your aggregate loan balance:

[sbull] $10,000 + $15,000 = $25,000

Step 2: Determine the annual
payment based on what you would pay

over 12 years using standard amortization. To do this, multiply your

aggregate loan balance by the constant multiplier for 8.25 percent

interest (0.131545). (The 8.25 percent interest rate used in this

example is the maximum interest rate that may be charged for all Direct

Loans excluding Direct PLUS Loans and certain Direct PLUS Consolidation

Loans; your actual interest rate may be lower. You can view the

constant multiplier chart at the end of this notice to determine the

constant multiplier that you should use for the interest rate on your

loan. If your exact interest rate is not listed, use the next highest

for estimation purposes.)

[sbull] 0.131545 x $25,000 = $3,288.63

Step 3: Multiply the result
of Step 2 by the income percentage

factor shown in the income percentage factors table that corresponds to

your and your spouse's income and then divide the result by 100. (If

your and your spouse's aggregate income is not listed in the income

percentage factors table, calculate the applicable income percentage

factor by following the instructions under the ``Interpolation''

heading later in this notice.):

[sbull] 109.40 x $3,288.63 / 100 = $3,597.76

Step 4: Determine 20 percent
of your discretionary income. To do

this, subtract the poverty level for a family of two, as published in

the Federal Register on February 7, 2003 (68 FR 6456), from your

combined AGI and multiply the result by 20 percent:

[sbull] $62,439 - $12,120 = $50,319

[sbull] $50,319 x 0.20 = $10,063.80

Step 5: Compare the amount
from Step 3 with the amount from Step 4.

The lower of the two will be your annual payment amount. You and your

spouse will pay the amount calculated under Step 3. To determine your

monthly repayment amount, divide the annual amount by 12.

[sbull] $3,597.76 / 12 = $299.81

Interpolation: If your income
does not appear on the income

percentage factors table, you will have to calculate the income

percentage factor through interpolation. For example, assume you are

single and your income is $25,000.

Step 1: Find the closest income listed that is less than your

income of $25,000 and the closest income listed that is greater than

your income of $25,000.

Step 2: Subtract the lower amount from the higher amount (for this

discussion, we will call the result the ``income interval''):

[sbull] $26,306 - $22,108 = $4,198

Step 3: Determine the difference
between the two income percentage

factors that are given for these incomes (for this discussion, we will

call the result, the ``income percentage factor interval''):

[sbull] 80.33% - 71.89% = 8.44%

Step 4: Subtract from your
income the closest income shown on the

chart that is less than your income of $25,000:

[sbull] $25,000 - $22,108 = $2,892

Step 5: Divide the result
of Step 4 by the income interval

determined in Step 2:

[sbull] $2,892 / $4,198 = 0.6889

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

factor interval:

[sbull] 8.44% x 0.6889 = 5.8143%

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 $25,000 in income:

[sbull] 5.8143% + 71.89% = 77.70% (rounded to the nearest hundredth)

The result is the income
percentage factor that will be used to

calculate the monthly repayment amount under the ICR plan.

2003 Income Percentage Factors

[Based on Annual Income]

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Single
Married/head of household

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Income % Factor
Income % Factor

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8,637....................... 55.00 8,637..........
50.52

11,885...................... 57.79 13,629.........
56.68

15,293...................... 60.57 16,243.........
59.56

18,779...................... 66.23 21,234.........
67.79

22,108...................... 71.89 26,306.........
75.22

26,306...................... 80.33 33,042.........
87.61

33,042...................... 88.77 41,439.........
100.00

41,440...................... 100.00 49,840.........
100.00

49,840...................... 100.00 62,439.........
109.40

59,901...................... 111.80 83,435.........
125.00

76,701...................... 123.50 112,831........
140.60

108,633..................... 141.20 157,799........
150.00

124,558..................... 150.00 257,856........
200.00

221,860..................... 200.00

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[[Page 26583]]

Constant Multiplier Chart for 12-Year Amortization

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Annual

Interest rate percent
constant

multiplier

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4.06...................................................... 0.105413

4.86...................................................... 0.110146

7.00...................................................... 0.123406

7.25...................................................... 0.125011

7.46...................................................... 0.126368

7.50...................................................... 0.126627

7.75...................................................... 0.128255

8.00...................................................... 0.129894

8.25...................................................... 0.131545

8.50...................................................... 0.133207

8.75...................................................... 0.134880

9.00...................................................... 0.136564

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BILLING CODE 4000-01-P

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[FR Doc. 03-12283 Filed 5-15-03; 8:45 am]

BILLING CODE 4000-01-C