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Publication
Date: May 11, 2007
FRPart:
Page Numbers: 26803-26808
Summary: Notice of
the annual updates to the Income Contingent Repayment (ICR) plan formula
for 2007
Posted on 05-11-2007
[Federal Register: May 11, 2007 (Volume 72, Number 91)]
[Notices]
[Page 26803-26808]
From the Federal Register Online via GPO Access [http://www.access.gpo.gov]
[DOCID:fr11my07-44]
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DEPARTMENT OF EDUCATION
William D. Ford Federal Direct Loan Program
AGENCY: Federal Student Aid, Department of Education.
ACTION: Notice of the annual updates to the Income Contingent Repayment (ICR) plan formula for 2007.
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SUMMARY: The Secretary announces the annual updates to the ICR plan
formula for 2007. Under the William D. Ford Federal Direct Loan (Direct
Loan) Program, borrowers may choose to repay their student loans
(Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct
Consolidation 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 2007, examples of how the
calculation of the monthly ICR amount is performed, a constant
multiplier chart for use in performing the calculations, and charts
showing sample repayment amounts based on the adjusted ICR plan
formula. The adjustments for the ICR plan formula contained in this
notice are effective from July 1, 2007 to June 30, 2008.
FOR FURTHER INFORMATION CONTACT: Don Watson, U.S. Department of
Education, room 114I2, UCP, 400 Maryland Avenue, SW., Washington, DC
20202-5400. Telephone: (202) 219-7037.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Relay Service (FRS) 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 under FOR FURTHER
INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION: Direct Loan Program borrowers may choose to
repay their Direct Subsidized Loans, Direct Unsubsidized Loans, and
Direct Consolidation Loans under the ICR plan. The attachments to this
notice provide updates to examples of how the calculation of the
monthly ICR amount is performed, the updated income percentage factors,
a constant multiplier chart for use in calculating the monthly ICR
amount, and charts showing sample repayment amounts for single and
married borrowers.
We have updated the income percentage factors to reflect changes
based on inflation. 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 in the Consumer
Price Index for all urban consumers from December 2006 to December
2007. 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 documents of
this Department published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/news/federegister.
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.gpoaccess.gov/nara/index.html.
Program Authority: 20 U.S.C. 1087 et seq.
Dated: May 8, 2007.
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 Subsidized and/or Unsubsidized Loans, the interest
rate being charged is 6.80 percent, and you have an adjusted gross
income (AGI) of $36,251. (The 6.80 percent interest rate used in
this example is a fixed interest rate that is charged on all Direct
Subsidized Loans and Direct Unsubsidized Loans first disbursed on or
after July 1, 2006. Different interest rates apply to Direct
Subsidized Loans and Direct Unsubsidized Loans first disbursed
before July 1, 2006, and to Direct PLUS Loans and Direct
Consolidation Loans. Your actual interest rate may be less than or
greater than 6.80 percent.)
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 an interest rate of
6.80 percent (0.122130). The constant multiplier is a factor used to
calculate amortized payments at a given interest rate over a fixed
period of time. 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 rate for
estimation purposes.
0.122130 x $15,000 = $1,831.95
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):
88.77 x $1,831.95 / 100 = $1,626.22
Step 3: Determine 20 percent of your discretionary income (your
discretionary income is your AGI minus the U.S. Department of Health
and Human Services (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 January
24, 2007 (72 FR 3147), from your AGI and multiply the result by 20
percent:
$36,251 - $10,210 = $26,041
$26,041 x 0.20 = $5,208.20
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.
$1,626.22 / 12 = $135.52
Example 2. In this example, you are married. You and your spouse
have a combined AGI of $68,504 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 6.80 percent.
Step 1: Add your and your spouse's Direct Loan balances together
to determine your aggregate loan balance:
$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
loan balance by the constant multiplier for 6.80 percent interest
(0.122130). 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 rate for estimation purposes.
0.122130 x $25,000 = $3,053.25
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):
109.40 x $3,053.25 / 100 = $3,340.26
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 January 24, 2007 (72 FR 3147), from your
combined AGI and multiply the result by 20 percent:
$68,504 - $13,690 = $54,814.00
$54,814.00 x 0.20 = $10,962.80
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.
$3,340.26 / 12 = $278.36
Example 3. This example assumes you are a single borrower with
$15,000 in Direct Subsidized and/or Unsubsidized Loans, the interest
rate being charged is 8.25 percent, and you have an AGI of $28,860.
(The 8.25 percent interest rate used in this example is the maximum
interest rate that may be charged for all Direct Subsidized Loans
and Direct Unsubsidized Loans that were first disbursed before July
1, 2006. Different interest rates apply to Direct Subsidized Loans
and Direct Unsubsidized Loans first disbursed on or after July 1,
2006, and to Direct PLUS Loans and Direct Consolidation Loans. Your
actual interest rate may be lower.)
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. 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 rate for
estimation purposes.
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):
80.33 x $1,973.18 / 100 = $1,585.06
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 January 24, 2007 (72 FR 3147), from your AGI and
multiply the result by 20 percent:
$28,860 - $10,210 = $18,650
$18,650 x 0.20 = $3,730
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.
$1,585.06 / 12 = $132.09
Example 4. In this example, you are married. You and your spouse
have a combined AGI of $54,680 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:
$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). 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 rate for
estimation purposes.
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):
100.00 x $3,288.63 / 100 = $3,288.63
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 January 24, 2007 (72 FR 3147), from your
combined AGI and multiply the result by 20 percent:
$54,680 - $13,690 = $40,990
$40,990 x 0.20 = $8,198
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.
$3,288.63 / 12 = $274.05
Interpolation: If your income does not appear on the income
percentage factor table, you will have to calculate the income
percentage factor through interpolation. For example, assume you are
single and your income is $30,000.
Step 1: Find the closest income listed that is less than your
income of $30,000 and the closest income listed that is greater than
your income of $30,000.
Step 2: Subtract the lower amount from the higher amount (for
this discussion, we will call the result the ``income interval''):
$36,251 - $28,860 = $7,391
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''):
88.77% - 80.33% = 8.44%
Step 4: Subtract from your income the closest income shown on
the chart that is less than your income of $30,000:
$30,000 - $28,860 = $1,140
Step 5: Divide the result of Step 4 by the income interval determined in Step 2:
$1,140 / $7,391= 0.1542
Step 6: Multiply the result of Step 5 by the income percentage
factor interval:
8.44% x 0.1542 = 1.301%
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 $30,000 in income:
1.301% + 80.33% = 81.63% (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.
**NOTE: (SEE PDF FILE FOR INCOME PERCENTAGE FACTORS CHART FOR 2006 BASED ON ANNUAL INCOME)
BILLING CODE 4000-01-P
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[FR Doc. 07-2360 Filed 5-10-07; 8:45 am]
BILLING CODE 4000-01-C
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