Summary: The Federal Perkins Loan Program-Expanded Lending Option (ELO) and an agreement to participate in the ELO.
SUBJECT : The Federal Perkins Loan Program-Expanded
Lending Option (ELO) and an agreement to
participate in the ELO.
REFERENCE: Section 463(a)(B)(i) of the Higher Education Act of
1965, as amended. Regulatory requirements are
contained in 34 CFR 674.7 and 674.8(a)(3) of the
Federal Perkins Loan Program Regulations.
Dear Financial Aid Administrator:
Congratulations! As a Federal Perkins Loan Program participant
with a low cohort default rate, your institution is eligible to
participate in the Federal Perkins Loan Program-Expanded Lending
The ELO is available for institutions that received Federal Perkins
Loan Federal Capital Contribution (FCC) for the 1996-97 award
year, and have cohort default rates of 15 percent or less. If your
institution elects to participate in the ELO, you will be required to
match 1996-97 award year FCC on at least a dollar-for-dollar basis.
Your institution may make loans to eligible students at higher
maximum annual and aggregate limits than is the case with non-
participating institutions. All other administrative procedures would
remain the same as for institutions not participating in the ELO.
Participation in the ELO will not result in any increase in your
If your institution elects to participate in the ELO, your institution
must submit the enclosed, special ELO participation agreement,
which must be completed and returned to the Department of
Education by AUGUST 1, 1996. If your institution does not elect to
participate in the ELO, you do not need to notify the Department.
INCREASED INSTITUTIONAL CAPITAL CONTRIBUTION
Your institution will be required to increase the Institutional Capital
contribution (ICC) to at least a dollar-for-dollar match with any
portion of the 1996-97 award year FCC allocation
Page 2 - Dear Financial Aid Administrator
received. The procedures for drawing down Federal funds will be no
different for a participating ELO institution than for an institution not
participating in the ELO.
Even if you ultimately do not make any loans at the higher ELO
levels for the 1996-97 award year, YOUR INSTITUTION MUST
HONOR ITS ELO PARTICIPATION AGREEMENT to deposit in
its Federal Perkins Loan Program Fund an ICC at least equal to the
1996-97 award year FCC deposited into the Fund.
In making your decision to participate in the ELO, you should
consider that, in addition to making the increased ICC match for any
initial FCC allocation you received, the increased ICC matching rate
applies to any supplemental allocation your institution may receive
for the 1996-97 award year. Your institution may waive its rights to
supplemental allocations in the 1996-97 award year to avoid the
unanticipated need for the additional ICC match by notifying the
Department in writing.
ELO LOAN LIMITS
Expanded Lending Option participants may make loans to eligible
Federal Perkins Loan Program borrowers at the following maximum
annual and aggregate loan limits:
$4,000 for a student who has not successfully completed a
program of undergraduate education, and
$6,000 for a graduate or professional student.
$8,000 for a student who has not successfully completed two
years of a program leading to a bachelor's degree,
$20,000 for a student who has successfully completed two years
of a program leading to a bachelor's degree but who has not
received the degree, and
$40,000 for a graduate or professional student.
These maximum aggregate loan amounts include all previous
amounts borrowed under the National Defense Student Loan,
National Direct Student Loan, and Federal Perkins Loan programs.
Page 3 - Dear Financial Aid Administrator
ELO PARTICIPATION AGREEMENT
Your institution must enter into an ELO participation agreement with
the Secretary annually. If your institution elects to participate in the
ELO during the 1996-97 award year, you must complete, sign, date
and return the enclosed "INSTITUTIONAL AGREEMENT FOR
PARTICIPATION IN THE FEDERAL PERKINS LOAN
PROGRAM-EXPANDED LENDING OPTION (ELO)", postmarked
by August 1, 1996.
Your completed, signed and dated agreement and/or any request to
waive your rights to any 1996-97 supplemental Federal Perkins Loan
Program allocation must be sent to:
Campus-Based Programs, Expanded Lending Option
Institutional Financial Management Division
U. S. Department of Education,
600 Independence Avenue, SW
Room 4714, ROB-3
Washington DC 20202-5458
If the Department of Education concurs with your institution's
eligibility to participate in the ELO, an official of the Department
will sign and date the agreement. A copy of the signed agreement
will be returned to you with an acceptance letter.
For information concerning ELO participation agreement
submissions, contact Sandra Donelson, Financial Management
Specialist, at (202) 708-9751.
Michele Selvage, Director
Institutional Financial Management