DCLPublicationDate: 6/1/97 DCLID: CB-97-8 AwardYear: Summary: The Federal Perkins Loan Program-Expanded Lending Option (ELO) and an agreement to participate in the ELO. June 1997 CB-97-8(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 Expanded Lending Option allows institutions to make loans to eligible students at higher maximum annual and aggregate loan limits than is the case with non-participating institutions. An institution may participate in ELO if it has a cohort default rate that is equal to or less than 15 percent, will receive a Federal Capital Contribution (FCC) for the 1997-98 award year, and has participated in the Federal Perkins Loan Program for the 1995-96 and 1996-97 award years. If your institution elects to participate in the ELO, a dollar-for-dollar match of the institution's 1997-98 award year FCC will be required. Participation in the ELO will not result in any increase in your institution's FCC. All other administrative procedures would remain the same as for institutions not participating in the ELO. In order 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, 1997. 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 1997-98 award year FCC allocation received. Even if you ultimately do not make any loans at the higher ELO levels for the 1997-98 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 1997-98 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 1997-98 award year. Your institution may waive its rights to supplemental allocations in the 1997-98 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. 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 1997-98 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, 1997. Your completed, signed and dated agreement and/or any request to waive your rights to any 1997-98 supplemental Federal Perkins Loan Program allocation must be sent to: Sandra K. Donelson Campus-Based Programs-Expanded Lending Option Institutional Financial Management Division U. S. Department of Education, P.O. Box 23781 Washington DC 20026-0781 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. SPECIAL NOTE: Starting with the 1998-99 award year, institutions will be able to apply for the Federal Perkins Loan Program- Expanded Lending Option directly through the Electronic FISAP software. A new Section C under Part II, the Application to Participate, will allow institutions to check yes if they choose to participate in the program. The ELO Participation Agreement will be printed directly from the FISAP diskette so that it may be signed and returned to ED along with the signature page and certifications forms. For information concerning ELO participation agreement submissions, contact Sandra Donelson, Financial Management Specialist on (202) 708-9751. Sincerely, Michele Selvage, Director Institutional Financial Management Division Enclosure |