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 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:
$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
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
For information concerning ELO participation agreement
submissions, contact Sandra Donelson, Financial Management
Specialist on (202) 708-9751.
Michele Selvage, Director
Institutional Financial Management