DCLPublicationDate: 6/1/96 DCLID: CB-96-10 AwardYear: Summary: The Federal Perkins Loan Program-Expanded Lending Option (ELO) and an agreement to participate in the ELO. June 1996 CB-96-10 (LD) 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 Option (ELO). 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 institution's FCC. 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: ANNUAL 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. AGGREGATE LIMITS: $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. Sincerely, Michele Selvage, Director Institutional Financial Management Division Enclosure |