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Catalog of Federal Domestic Assistance (CFDA) Number: 84.063
AGENCY:
Federal Student Aid, Department of Education.
ACTION:
Notice.
SUMMARY:
The Secretary announces the annual updates to the ICR plan formula for 2013, as provided in 34 CFR 685.209(a)(8), to give notice to Direct Loan borrowers and the public regarding how monthly ICR payment amounts will be calculated for the 20132014 year.
DATES:
The adjustments to the income percentage factors for the ICR plan formula contained in this notice are effective from July 1, 2013, to June 30, 2014, for any borrower who enters the ICR plan or has his or her monthly payment amount recalculated under the ICR plan during that period.
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FOR FURTHER INFORMATION CONTACT:
Ian Foss, U.S. Department of Education, 830 First Street, NE., room 114I1, Washington, DC 20202. Telephone: (202) 3773681 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 18008778339.
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SUPPLEMENTARY INFORMATION:
Under the William D. Ford Federal Direct Loan (Direct Loan) Program, borrowers may choose to repay their 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 2013, 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:

Attachment 1—Income Percentage Factors for 2013

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 a Federal Register on May 22, 2012 (77 FR 30266). 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 in the notseasonallyadjusted Consumer Price Index for all urban consumers from December 2012 to December 2013.
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.
Start Printed Page 33396Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.
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20 U.S.C. 1087 et seq.
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Start Signature
Dated: May 30, 2013.
James W. Runcie,
Chief Operating Officer, Federal Student Aid.
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Attachment 1—Income Percentage Factors for 2013
Income Percentage Factors for 2013
Single  Married/head of household 

Income  % Factor  Income  % Factor 

$10,690  55.00  $10,690  50.52 
14,708  57.79  16,867  56.68 
18,926  60.57  20,100  59.56 
23,239  66.23  26,276  67.79 
27,359  71.89  32,552  75.22 
32,552  80.33  40,888  87.61 
40,888  88.77  51,279  100.00 
51,280  100.00  61,676  100.00 
61,676  100.00  77,269  109.40 
74,126  111.80  103,250  125.00 
94,916  123.50  139,627  140.60 
134,433  141.20  195,275  150.00 
154,139  150.00  319,093  200.00 
274,549  200.00   
Attachment 2—Examples of the Calculations of Monthly Repayment Amounts
General notes about the examples in this attachment:
 We have two calculators that borrowers can use to estimate what their payment amount would be under the ICR plan. The first is available on StudentAid.gov/ICR. The second, a “Repayment Estimator” available at StudentLoans.gov, provides more detailed, individualized information about 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 2013 U.S. Department of Health and Human Services (HHS) Poverty Guidelines for the 48 contiguous States and the District of Columbia, as published in the Federal Register on January 24, 2013 (78 FR 5182). Different Poverty Guidelines apply to residents of Alaska and Hawaii.
 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 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 12year 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:
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
 N is the total number of months in the repayment period (for example, for a loan with a 12year 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.
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 one from the result.
 0.068 ÷ 12 = 0.005667
 1 + 0.005667 = 1.005667
 1.005667 ⁁ 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 × 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 $27,359.
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 $27,359 corresponds to an income percentage factor of 71.89 percent.
 0.7189 × $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:
 $27,359−$11,490 = $15,869
 $15,869 × 0.20 = $3,173.80
 $3,173.80 ÷ 12 = $264.48
Step 4: Compare the amount from Step 2 with the amount from Step 3. Start Printed Page 33397The 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 $77,269 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 $77,269 corresponds to an income percentage factor of 109.40 percent.
 1.094 × $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:
 $77,269−$15,510 = $61,759
 $61,759 × 0.20 = $12,351.80
 $12,351.80 ÷ 12 = $1,029.32
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 4 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 × $278.36 = $111.34
For Susan, the monthly payment amount will be:
 $15,000 ÷ ($10,000 + $15,000) = 60 percent
 0.60 × $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 $32,552.
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 $32,552 corresponds to an income percentage factor of 80.33 percent.
 0.8033 × $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:
 $32,552 − $11,490 = $21,062
 $21,062 × 0.20 = $4,212.40
 $4,212.40 ÷ 12 = $351.03
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 ($351.03).
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”):
 $51,280 − $40,888 = $10,392
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 − $40,888 = $9,112
Step 5: Divide the result of Step 4 by the income interval determined in Step 2:
 $9,112 ÷ $10,392 = 0.8768
Step 6: Multiply the result of Step 5 by the income percentage factor interval:
 11.23 percent × 0.8768 = 9.846 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:
 9.846 percent + 88.77 percent = 98.62 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 FirstYear Monthly Repayment Amounts for a Single Borrower at Various Income and Debt Levels
Income  Family Size = 1 

Direct Loan Debt 

$10,000  $20,000  $30,000  $40,000  $50,000  $60,000  $70,000  $80,000  $90,000  $100,000 

$10,000  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
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12,500  17  17  17  17  17  17  17  17  17  17 
15,000  59  59  59  59  59  59  59  59  59  59 
17,500  61  100  100  100  100  100  100  100  100  100 
20,000  63  126  142  142  142  142  142  142  142  142 
22,500  66  133  184  184  184  184  184  184  184  184 
25,000  70  140  210  225  225  225  225  225  225  225 
30,000  78  155  233  309  309  309  309  309  309  309 
35,000  84  169  253  337  392  392  392  392  392  392 
40,000  89  179  268  358  447  475  475  475  475  475 
45,000  95  190  285  379  474  559  559  559  559  559 
50,000  100  201  301  401  502  602  642  642  642  642 
60,000  102  204  305  407  509  611  712  809  809  809 
70,000  110  220  329  439  549  659  769  878  975  975 
80,000  117  234  351  469  586  703  820  937  1,054  1,142 
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 
Sample repayment amounts are based on an interest rate of 6.80% 
Sample FirstYear Monthly Repayment Amounts for a Married or HeadofHousehold Borrower at Various Income and Debt Levels
Income  Family Size = 3 

Direct Loan Debt 

$10,000  $20,000  $30,000  $40,000  $50,000  $60,000  $70,000  $80,000  $90,000  $100,000 

$10,000  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
12,500  0  0  0  0  0  0  0  0  0  0 
15,000  0  0  0  0  0  0  0  0  0  0 
17,500  0  0  0  0  0  0  0  0  0  0 
20,000  8  8  8  8  8  8  8  8  8  8 
22,500  50  50  50  50  50  50  50  50  50  50 
25,000  67  91  91  91  91  91  91  91  91  91 
30,000  73  147  175  175  175  175  175  175  175  175 
35,000  80  161  241  258  258  258  258  258  258  258 
40,000  88  176  263  341  341  341  341  341  341  341 
45,000  94  188  282  377  425  425  425  425  425  425 
50,000  100  200  301  401  501  508  508  508  508  508 
60,000  102  204  305  407  509  611  675  675  675  675 
70,000  107  214  321  428  534  641  748  841  841  841 
80,000  113  226  339  452  565  678  791  904  1,008  1,008 
90,000  119  238  357  476  596  715  834  953  1,072  1,175 
100,000  125  250  376  501  626  751  877  1,002  1,127  1,252 
Sample repayment amounts are based on an interest rate of 6.80% 
End Supplemental Information
[FR Doc. 201313193 Filed 6313; 8:45 am]
BILLING CODE 400001P