[Federal Register Volume 72, Number 91 (Friday, May 11, 2007)]
[Notices]
[Pages 26803-26808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2360]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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

[[Page 26804]]

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.

    <bullet> 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):

    <bullet> 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:

    <bullet> $36,251 - $10,210 = $26,041
    <bullet> $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.

    <bullet> $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:

    <bullet> $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.

    <bullet> 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):
    <bullet> 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:

    <bullet> $68,504 - $13,690 = $54,814.00

    <bullet> $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.

    <bullet> $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.

    <bullet> 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):

    <bullet> 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:

    <bullet> $28,860 - $10,210 = $18,650

    <bullet> $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

[[Page 26805]]

determine your monthly repayment amount, divide the annual amount by 
12.

    <bullet> $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:

    <bullet> $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.

    <bullet> 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):

    <bullet> 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:

    <bullet> $54,680 - $13,690 = $40,990

    <bullet> $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.

    <bullet> $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''):

    <bullet> $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''):

    <bullet> 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:

    <bullet> $30,000 - $28,860 = $1,140

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

    <bullet> $1,140 / $7,391= 0.1542

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

    <bullet> 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:

    <bullet> 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.

                                       Income Percentage Factors for 2006
                                            [Based on annual income]
----------------------------------------------------------------------------------------------------------------
                           Single                                          Married/head of household
----------------------------------------------------------------------------------------------------------------
                     Income                        % factor                   Income                   % factor
----------------------------------------------------------------------------------------------------------------
9,477..........................................       55.00   9,477.................................       50.52
13,040.........................................       57.79   14,953................................       56.68
16,779.........................................       60.57   17,820................................       59.56
20,603.........................................       66.23   23,296................................       67.79
24,255.........................................       71.89   28,860................................       75.22
28,860.........................................       80.33   36,251................................       87.61
36,251.........................................       88.77   45,463................................      100.00
45,464.........................................      100.00   54,680................................      100.00
54,680.........................................      100.00   68,504................................      109.40
65,719.........................................      111.80    91,538...............................      125.00
84,150.........................................      123.50   123,789...............................      140.60
119,184........................................      141.20   173,126...............................      150.00
136,656........................................      150.00   282,900...............................      200.00
243,409........................................      200.00
----------------------------------------------------------------------------------------------------------------


           Constant Multiplier Chart for 12-Year Amortization
------------------------------------------------------------------------
                                                                Annual
                     Interest rate  (%)                        constant
                                                              multiplier
------------------------------------------------------------------------
 3.500.....................................................     0.102174
 4.000.....................................................     0.105063
 4.500.....................................................     0.108001
 5.000.....................................................     0.110987
 5.500.....................................................     0.114021
 6.000.....................................................     0.117102
 6.800.....................................................     0.122130
 7.000.....................................................     0.123406
 7.900.....................................................     0.129237
 8.000.....................................................     0.129894
 8.250.....................................................     0.131545
------------------------------------------------------------------------

BILLING CODE 4000-01-P

[[Page 26806]]

[GRAPHIC] [TIFF OMITTED] TN11MY07.012


[[Page 26807]]


[GRAPHIC] [TIFF OMITTED] TN11MY07.013


[[Page 26808]]


[FR Doc. 07-2360 Filed 5-10-07; 8:45 am]
BILLING CODE 4000-01-C