Annual Updates to the Income-Contingent Repayment (ICR) Plan Formula for 2024-William D. Ford Federal Direct Loan Program
| Published date | 05 April 2024 |
| Record Number | 2024-07263 |
| Citation | 89 FR 23990 |
| Court | Education Department |
| Section | Notices |
Federal Register, Volume 89 Issue 67 (Friday, April 5, 2024)
[Federal Register Volume 89, Number 67 (Friday, April 5, 2024)]
[Notices]
[Pages 23990-23993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07263]
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DEPARTMENT OF EDUCATION
Annual Updates to the Income-Contingent Repayment (ICR) Plan
Formula for 2024--William D. Ford Federal Direct Loan Program
AGENCY: Federal Student Aid, Department of Education.
ACTION: Notice.
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SUMMARY: The Secretary announces the annual updates to the ICR plan
formula for 2024 to give notice to borrowers and the public regarding
how monthly ICR payment amounts will be calculated for the 2024-2025
year under the William D. Ford Federal Direct Loan (Direct Loan)
Program, Assistance Listing Number 84.063.
DATES: The adjustments to the income percentage factors for the ICR
plan formula contained in this notice are applicable from July 1, 2024,
to June 30, 2025, for any borrower who enters the ICR plan or has a
monthly payment amount under the ICR plan recalculated during that
period.
FOR FURTHER INFORMATION CONTACT: Travis Sturlaugson, U.S. Department of
Education, 830 First Street NE, Washington, DC 20202. Telephone: (202)
377-4174. Email: [email protected].
If you are deaf, hard of hearing, or have a speech disability and
wish to access telecommunications relay services, please dial 7-1-1.
SUPPLEMENTARY INFORMATION: Effective July 1, 2024, borrowers may select
the ICR plan only for repayment of non-defaulted Direct Consolidation
Loans that repaid one or more Direct or Federal PLUS Loans made to a
parent borrower. However, borrowers who were repaying other types of
Direct Loans under the ICR plan as of July 1, 2024, may continue to
repay their loans under that plan. Under the ICR plan, the borrower's
monthly payment amount is based on the borrower's Adjusted Gross Income
(AGI), family size, loan amount, and the interest rate applicable to
each of the borrower's loans.
A Direct Loan borrower who repays under the ICR plan pays the
lesser of: (1) the monthly amount that would be required over a 12-year
repayment period with fixed payments, multiplied by an income
percentage factor; or (2) 20 percent of their discretionary income.
We adjust the income percentage factors annually to reflect changes
in inflation and announce the adjusted factors in the Federal Register,
as required by 34 CFR 685.209(b)(1)(ii)(A). 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 annual income documentation, as required under the ICR
plan. This notice contains the adjusted income percentage factors for
2024, examples of how the monthly ICR payment amount 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 2024
Attachment 2--Examples of the Calculations of Monthly
Repayment Amounts
Attachment 3--Charts Showing Sample ICR Repayment Amounts for
Single and Married Borrowers
In Attachment 1, to reflect changes in inflation, we updated the
income percentage factors that were published in the Federal Register
on April 26, 2023 (88 FR 25388). 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 between the not-seasonally-adjusted Consumer Price Index for all
urban consumers for December 2023 and December 2024.
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. The revised
repayment amount more accurately reflects the impact of inflation on
the borrower's current ability to repay.
Accessible Format: On request to the program contact person listed
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities
can obtain this document in an accessible format. The Department will
provide the requestor with an accessible format that may include Rich
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file,
braille, large print, audiotape, or compact disc, or other accessible
format.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. You may
access the official edition of the Federal Register and the Code of
Federal Regulations at www.govinfo.gov. 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 Portable Document Format (PDF). To
use PDF, you must have Adobe Acrobat Reader, which is available free at
this site.
You may also access documents of the Department published in the
Federal Register by using the article search feature at
www.federalregister.gov. Specifically, through the advanced search
feature at this site, you can limit your search to documents published
by the Department.
Program Authority: 20 U.S.C. 1087 et seq.
Richard Cordray,
Chief Operating Officer, Federal Student Aid.
Attachment 1--Income Percentage Factors for 2024
Income Percentage Factors for 2024
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Single Married/head of household
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AGI Percent factor AGI Percent factor
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$13,736.................................... 55.00 $13,736....................... 50.52
$18,900.................................... 57.79 $21,672....................... 56.68
$24,319.................................... 60.57 $25,826....................... 59.56
$29,861.................................... 66.23 $33,764....................... 67.79
$35,153.................................... 71.89 $41,828....................... 75.22
$41,828.................................... 80.33 $52,536....................... 87.61
$52,536.................................... 88.77 $65,889....................... 100.00
$65,890.................................... 100.00 $79,249....................... 100.00
[[Page 23991]]
$79,249.................................... 100.00 $99,285....................... 109.40
$95,245.................................... 111.80 $132,667...................... 125.00
$121,958................................... 123.50 $179,409...................... 140.60
$172,734................................... 141.20 $250,911...................... 150.00
$198,056................................... 150.00 $410,007...................... 200.00
$352,771................................... 200.00 .............................. ................
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Attachment 2--Examples of the Calculations of Monthly Repayment Amounts
General notes about the examples in this attachment:
We have a calculator that borrowers can use to estimate
what their payment amounts would be under the ICR plan. The calculator
is called the ``Loan Simulator'' and is available at studentaid.gov/loan-simulator. Based on information entered into the calculator by the
borrower (for example, income, family size, and tax filing status),
this calculator provides a detailed, individualized assessment of 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 loan was
first disbursed.
The Poverty Guideline amounts used in the examples are
from the 2024 U.S. Department of Health and Human Services (HHS)
Poverty Guidelines for the 48 contiguous States and the District of
Columbia. Different Poverty Guidelines apply to residents of Alaska and
Hawaii. The Poverty Guidelines for 2024 were published in the Federal
Register on January 17, 2024 (89 FR 2961).
All of the examples use an income percentage factor
corresponding to an adjusted gross income (AGI) in the table in
Attachment 1. If an AGI is not listed in the income percentage factors
table in Attachment 1, the applicable income percentage can be
calculated by following the instructions under the ``Interpolation''
heading later in this attachment.
Married borrowers may repay their Direct Loans jointly
under the ICR plan if both spouses have loans eligible for the ICR
plan. If a married couple elects this option, we determine a joint ICR
payment amount based on the combined outstanding balances of each
borrower's Direct Loans and the combined AGIs of both borrowers. 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 Briana, has a
total outstanding Direct Loan debt of $60,000 that is eligible for
repayment under the ICR plan, of which $40,000 belongs to John and
$20,000 to Briana, we would apportion 67 percent of the monthly ICR
payment to John and the remaining 33 percent to Briana. 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 12-year 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:
M = P x < (I / 12) / [1 - {1 + (I / 12){time} [caret] - N] >
In the formula--
M is the monthly payment amount;
P is the outstanding principal and interest balance of the
loan at the time the loan entered repayment;
I is the annual interest rate on the loan, expressed as a
decimal (for example, for a loan with an interest rate of 6 percent,
0.06); and
N is the total number of months in the repayment period
(for example, for a loan with a 12-year repayment period, 144 months).
For example, assume that Billy has a $10,000 Direct Loan that is
eligible for repayment under the ICR plan with an interest rate of 6
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 expressed as a decimal) by 12. In
this example, Billy's interest rate is 6 percent. As a decimal, 6
percent is 0.06.
0.06 / 12 = 0.005
Step 2: Next, simplify the denominator of the fraction by which we
multiply P. To do this divide I (the interest rate expressed 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 the result
from one.
0.06 / 12 = 0.005
1 + 0.005 = 1.005
1.005 [caret] -144 = 0.48762628
1-0.48762628 = 0.51237372
Step 3: Next, resolve the fraction by dividing the result from Step
1 by the result from Step 2.
0.005 / 0.51237372 = 0.0097585
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 x 0.0097585 = $97.59
The remainder of the examples in this attachment will only show the
results of the formula. In each of the examples, the Direct Loan
amounts represent the outstanding principal balance at the time the
loans entered repayment.
Example 1. Kesha is single with no dependents and has $15,000 in
Direct Loans that are eligible for repayment under the ICR plan. The
interest rate on Kesha's loans is 6 percent, and she has an AGI of
$35,153.
Step 1: Determine the total monthly payment amount based on what
Kesha 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 $146.38.
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 Kesha's AGI. In this example, an
AGI of $35,153 corresponds to an income percentage factor of 71.89
percent.
0.7189 x $146.38 = $105.23
[[Page 23992]]
Step 3: Now, determine the monthly payment amount equal to 20
percent of Kesha's 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 HHS Poverty Guideline
amount for a family of one from Kesha's AGI, multiply the result by 20
percent, and then divide by 12:
$35,153-$15,060 = $20,093
$20,093 x 0.20 = $4,018.60
$4,018.60 / 12 = $334.88
Step 4: Compare the amount from Step 2 with the amount from Step 3.
In this example, Kesha would pay the amount calculated under Step 2
($105.23), since this is the lesser of the two payment amounts.
Example 2. Paul is married to Jesse and they have no dependents.
They file their Federal income tax return jointly. Paul has a Direct
Loan balance of $10,000, and Jesse has a Direct Loan balance of
$15,000. Both of their Direct Loans are eligible for repayment under
the ICR plan and have an interest rate of 6 percent.
Paul and Jesse have a combined AGI of $99,285 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 Paul's and Jesse'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 Paul and
Jesse 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, their combined monthly payment amount would
be $243.96.
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 Paul and Jesse's combined AGI. In
this example, the combined AGI of $99,285 corresponds to an income
percentage factor of 109.40 percent.
1.094 x $243.96 = $266.90
Step 4: Now, determine the monthly payment amount equal to 20
percent of Paul and Jesse'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 then divide by 12:
$99,285-$20,440 = $78,845
$78,845 x 0.20 = $15,769
$15,769 / 12 = $1,314.08
Step 5: Compare the amount from Step 3 with the amount from Step 4.
Paul and Jesse would jointly pay the amount calculated under Step 3
($266.90), since this is the lesser of the two amounts.
Step 6: Because Paul and Jesse are jointly repaying their Direct
Loans under the ICR plan, the monthly payment amount calculated under
Step 5 applies to Paul and Jesse's combined 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. Paul has a Direct Loan debt of $10,000 and Jesse has a
Direct Loan debt of $15,000. For Paul, the monthly payment amount will
be:
$10,000 / ($10,000 + $15,000) = 40 percent
0.40 x $266.90 = $106.76
For Jesse, the monthly payment amount will be:
$15,000 / ($10,000 + $15,000) = 60 percent
0.60 x $266.90 = $160.14
Example 3. Santiago is single with no dependents and has a combined
balance of $60,000 in Direct Loans that are eligible for repayment
under the ICR plan. Each of Santiago's loans has an interest rate of 6
percent, and Santiago's AGI is $41,828.
Step 1: Determine the total monthly payment amount based on what
Santiago 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 $585.51.
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 Santiago's AGI. In this example, an
AGI of $41,828 corresponds to an income percentage factor of 80.33
percent.
0.8033 x $585.51 = $470.34
Step 3: Now, determine the monthly payment amount equal to 20
percent of Santiago's 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 HHS Poverty Guideline
amount for a family of one from Santiago's AGI, multiply the result by
20 percent, and then divide by 12:
$41,828-$15,060 = $26,768
$26,768 x 0.20 = $5,353.60
$5,353.60 / 12 = $446.13
Step 4: Compare the amount from Step 2 with the amount from Step 3.
In this example, Santiago would pay the amount calculated under Step 3
($446.13), since this is the lesser of the two amounts.
Interpolation. If an AGI is not included on the income percentage
factor table, calculate the income percentage factor through linear
interpolation. For example, assume that Jocelyn is single with an AGI
of $50,000.
Step 1: Find the closest AGI listed that is less than Jocelyn's AGI
of $50,000 ($41,828) and the closest AGI listed that is greater than
Jocelyn's AGI of $50,000 ($52,536).
Step 2: Subtract the lower amount from the higher amount (for this
discussion we will call the result the ``income interval''):
$52,536-$41,828 = $10,708
Step 3: Determine the difference between the two income percentage
factors that correspond to the AGIs used in Step 2 (for this
discussion, we will call the result the ``income percentage factor
interval''):
88.77 percent-80.33 percent = 8.44 percent
Step 4: Subtract from Jocelyn's AGI the closest AGI shown on the
chart that is less than Jocelyn's AGI of $50,000:
$50,000-$41,828 = $8,172
Step 5: Divide the result of Step 4 by the income interval
determined in Step 2:
$8,172 / $10,708 = 76.32 percent
Step 6: Multiply the result of Step 5 by the income percentage
factor interval that was calculated in Step 3:
8.44 percent x 76.32 percent = 6.44 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 an AGI of $50,000:
6.44 percent + 80.33 percent = 86.77 percent (rounded to the
nearest hundredth)
The result is the income percentage factor that we will use to
calculate Jocelyn's monthly repayment amount under the ICR plan.
Attachment 3--Charts Showing Sample Income Contingent Repayment (ICR)
Plan Amounts for Single and Married Borrowers
Below are two charts that provide first-year payment amount
estimates for a variety of loan debt sizes and AGIs
[[Page 23993]]
under the ICR plan. The first chart is for a single borrower who has a
family size of one. The second chart is for a borrower who is married
or a head of household and who has a family size of three. The
calculations in Attachment 3 assume that the loan debt has an interest
rate of 6 percent. For the married borrower, the calculations assume
that the borrower files a joint Federal income tax return and that the
borrower's spouse does not have Federal student loans.
Sample First-Year Monthly Repayment Amounts for a Single Borrower
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Family size = 1
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AGI
Initial debt ----------------------------------------------------------------------------------------------
$20,000 $40,000 $60,000 $80,000 $100,000
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$20,000.................................................. $82 $152 $186 $196 $222
$40,000.................................................. 82 305 371 393 445
$60,000.................................................. 82 416 557 589 667
$80,000.................................................. 82 416 742 785 889
$100,000................................................. 82 416 749 981 1,111
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Sample First-Year Monthly Repayment Amounts for a Married or Head-of-Household Borrower
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Family size = 3
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AGI
Initial debt ----------------------------------------------------------------------------------------------
$20,000 $40,000 $60,000 $80,000 $100,000
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$20,000.................................................. $0 $144 $185 $196 $214
$40,000.................................................. 0 236 369 392 428
$60,000.................................................. 0 236 554 588 643
$80,000.................................................. 0 236 570 783 857
$100,000................................................. 0 236 570 903 1,071
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[FR Doc. 2024-07263 Filed 4-4-24; 8:45 am]
BILLING CODE 4000-01-P
