07/01/97: FinRule: William D. Ford Federal Direct Loan Program [OPE]
[Federal Register: July 1, 1997 (Volume 62, Number 126)]
[Rules and Regulations]
[Page 35601-35606]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jy97-39]
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Part IV
Department of Education
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34 CFR Part 685
William D. Ford Federal Direct Loan Program; Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 685
RIN 1840-AC43
William D. Ford Federal Direct Loan Program
AGENCY: Department of Education.
ACTION: Final regulations.
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SUMMARY: These regulations contain revised income percentage factors
for the income contingent repayment plan, a repayment plan available in
the William D. Ford Federal Direct Loan (Direct Loan) Program. In
addition, these regulations contain updated sample income contingent
repayment amounts for single and married or head-of-household borrowers
at various income and debt levels.
EFFECTIVE DATE: These regulations take effect July 1, 1997.
FOR FURTHER INFORMATION CONTACT: Ms. Rachel Edelstein, Program
Specialist, Direct Loan Policy, Policy Development Division, U.S.
Department of Education, Room 3053, ROB-3, 600 Independence Avenue, SW,
Washington, D.C. 20202-5400. Telephone: (202) 708-8242. Individuals who
use a telecommunications device for the deaf (TDD) may call the Federal
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8
p.m., Eastern time, Monday through Friday.
SUPPLEMENTARY INFORMATION: The regulations are amended to revise the
income percentage factors and sample repayment amount information in
final regulations in Appendix A to 34 CFR Part 685, published on June
19, 1996 (61 FR 31358).
The Secretary has revised the table in the appendix showing income
percentage factors to reflect changes based on inflation. The revised
table was developed by changing the dollar amounts shown by a
percentage equal to the estimated percentage changes in the Consumer
Price Index for all Urban Consumers from December 1996 to December
1997. In addition, the examples of the calculation of monthly repayment
amounts and the charts showing sample repayment amounts have been
amended to reflect the updated income percentage factors.
Under the updated income percentage factors, at any given income,
borrowers' payments will be slightly lower than under the income
percentage factors published in the June 19, 1996 regulations. These
updated income percentage factors more accurately reflect a borrower's
current ability to repay than those previously published because these
factors are based on more recent data.
Waiver of Proposed Rulemaking
In accordance with section 437 of the General Education Provisions
Act, 20 U.S.C. 1232, and the Administrative Procedure Act, 5 U.S.C.
553, it is the practice of the Secretary to offer interested parties
the opportunity to comment on proposed regulations. However, the
changes in this document do not establish any new rules but simply
update the income percentage factors used in the income contingent
repayment plan, as required under 34 CFR 685.209(a)(8), and revise
sample repayment information accordingly. Therefore, the Secretary has
determined that publication of a proposed rule is unnecessary and
contrary to the public interest under 5 U.S.C. 553(b)(B). For the same
reasons, the Secretary waives the 30-day delayed effective date under 5
U.S.C. 553(d).
Paperwork Reduction Act of 1995
These regulations have been examined under the Paperwork Reduction
Act of 1995 and have been found to contain no information collection
requirements.
Regulatory Flexibility Act Certification
The Secretary certifies that these regulations will not have
significant economic impact on a substantial number of small entities.
The regulations will affect borrowers who are in repayment and will not
affect institutions participating in the Direct Loan Program. The
Regulatory Flexibility Act does not include individuals in its
definition of ``small entities''. Thus, the changes will not have a
significant economic impact on any small entities under the Regulatory
Flexibility Act.
Assessment of Educational Impact
The Secretary has determined that the regulations in this document
would not require transmission of information that is being gathered by
or is available from any other agency or authority of the United
States.
List of Subjects in 34 CFR Part 685
Administrative practice and procedure, Colleges and universities,
Education, Loan programs-education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
(Catalog of Federal Domestic Assistance Number 84.268 William D.
Ford Federal Direct Loan Program)
Dated: June 25, 1997.
Richard W. Riley,
Secretary of Education.
The Secretary amends Part 685 of title 34 of the Code of Federal
Regulations as follows:
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
1. The authority citation for part 685 continues to read as
follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
2. Appendix A to part 685 is revised to read as follows:
Appendix A to part 685--Income Contingent Repayment
Examples of the Calculation of Monthly Repayment Amounts
Example 1. A single borrower with $12,500 of Direct Loans, 8.25
percent interest rate, and an adjusted gross income (AGI) of
$22,791.
Step 1: Determine annual payments based on what the borrower
would pay over 12 years using standard amortization. To do this,
multiply the principal balance by the constant multiplier for 8.25
percent interest (0.1315452). The constant multiplier is a factor
used to calculate amortized payments at a given interest rate over a
fixed period of time. (See the constant multiplier chart below to
determine the constant multiplier you should use for the interest
rate on the loan. If the exact interest rate is not listed, use the
next highest for estimation purposes.)
0.1315452 x 12,500=1,644.315
Step 2: Multiply the result by the income percentage factor
shown in the income percentage factor table that corresponds to the
borrower's income (if the income is not listed, you can calculate
the applicable income percentage factor by following the
instructions under the interpolation heading below):
80.33% (0.8033) x 1,644.315=1,320.8782
Step 3: Determine 20 percent of discretionary income. For a
single borrower, subtract the poverty level for a family of one, as
published in the Federal Register on March 10, 1997 (62 FR 10856),
from the borrower's income and multiply the result by 20%:
$22,791--$7,890=$14,901
$14,901 x 0.20=$2,980.20
Step 4: Compare the amount from step 2 with the amount from step
3. The lower of the two will be the borrower's annual payment
amount. This borrower will be paying the amount calculated under
step 2. To determine the monthly repayment amount, divide the annual
amount by 12.
1,320.8782/12=$110.07
Example 2. Married borrowers repaying jointly under the income
contingent repayment plan with a combined AGI of $28,627. The
husband has a Direct Loan balance of $5,000, and the wife has a
Direct Loan balance of $15,000. The interest rate is 8.25 percent.
This couple has no children.
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Step 1: Add the Direct Loan balances of the husband and wife
together to determine the aggregate loan balance.
$5,000+$15,000=$20,000
Step 2 Determine the annual payments based on what the couple
would pay over 12 years using standard amortization. To do this,
multiply the aggregate principal balance by the constant multiplier
for 8.25 percent interest (0.1315452). (See the constant multiplier
chart to determine the constant multiplier you should use for the
interest rate on the loan. If the exact interest rate is not listed,
choose the next highest rate for estimation purposes.)
0.1315452 x 20,000=2,630.904
Step 3 Multiply the result by the income percentage factor shown
in the income percentage factor table that corresponds to the
couple's income (if the income is not listed, you can calculate the
applicable income percentage factor by following the instructions
under the interpolation heading below):
87.61% (0.8761) x 2,630.904=2,304.9350
Step 4 Determine 20 percent of the couple's discretionary
income. To do this, subtract the HHS poverty level for a family of
2, as published in the Federal Register on March 10, 1997 (62 FR
10856), from the couple's income and multiply the result by 20
percent:
$28,627--$10,610=$18,017
$18,017 x 0.20=$3,603.40
Step 5 Compare the amount from step 3 with the amount from step
4. The lower of the two will be the annual payment amount. The
married borrowers will be paying the amount calculated under step 3.
To determine the monthly repayment amount, divide the annual amount
by 12.
2,304.9350/12=$192.08
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 $26,000. To interpolate, you must first
find the interval between the closest income listed that is less
than $26,000 and the closest income listed that is greater than
$26,000 (for this discussion, we'll call the result ``the income
interval''):
$28,627--$22,791=$5,836
Next, find the interval between the two income percentage factors
that are given for these incomes (for this discussion, we'll call
the result, the ``income percentage factor interval''):
88.77--80.33=8.44
Subtract the income shown on the chart that is immediately less than
$26,000 from $26,000:
$26,000-$22,791=$3,209
Divide the result by the number representing the income interval:
$3,209/$5,836=0.5499
Multiply the result by the income percentage factor interval:
0.5499 x 8.44=4.64
Add the result to the lower income percentage factor used to
calculate the income percentage factor interval for $26,000 in
income:
4.64+80.33=84.97%
The result is the income percentage factor that will be used to
calculate the monthly repayment amount under the income contingent
repayment plan.
BILLING CODE 4000-01-P
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[FR Doc. 97-17130 Filed 6-30-97; 8:45 am]
BILLING CODE 4000-01-C