Publication Date: September 29, 2015
Subject: Perkins Loan Program - Excess Liquid Capital
Summary: This letter reminds institutions that participate in the Federal Perkins Loan Program of the requirement that they return to the Department of Education the Federal portion of any Excess Liquid Capital in their Perkins Loan Revolving Fund. The letter includes, as an attachment, interactive worksheets for institutions to use to determine the amount of Excess Liquid Capital that must be returned.
Section 466(c) of the Higher Education Act requires institutions to return to the Department of Education (Department) the Federal share of any Excess Liquid Capital (ELC) in the institution’s Federal Perkins Loan Revolving Fund (Fund). ELC is the amount of the Fund’s “Cash On Hand” that is in excess of the institution’s estimated immediate needs. This statutory requirement for institutions to return ELC is not directly related to the wind-down of the Perkins Loan program. Each institution that participates in the Federal Perkins Loan Program must, using the ELC Worksheet attached to this letter, determine if its Fund includes ELC. If there is ELC in the institution’s Fund, the attached Proportional Share Worksheet will allow the institution to calculate the Federal share of the ELC that must be returned to the Department and the institutional share of the ELC that must be removed from the Fund and returned to the institution.1
IMPORTANT: The Federal share of the institution’s ELC must be returned to the Department no later than December 31, 2015, using the process described in the “Instructions for Returning Perkins Funds” located on our Information for Financial Aid Professionals (IFAP) website.
The attached worksheets require the institution to input certain data from the Perkins Loan section of its two most recently submitted Fiscal Operations/Application to Participate (FISAP).
For the purpose of meeting the December 31, 2015, deadline for the return of funds, institutions should use the data from the two most recently filed FISAPs as defined below.
Latest Award Year FISAP- the FISAP that must be filed no later than October 1, 2015, and reports Perkins Loan activity for the 2014-2015 award year.
Previous Award Year FISAP- the FISAP that was filed by October 1, 2014, and reported Perkins Loan activity for the 2013-2014 award year.
Calculating Excess Liquid Capital (ELC)
The ELC Worksheet calculates Estimated Available Funds as the total of the Fund’s cash on hand plus, as an estimate of future collections, 75% of the collections reported on the institution’s Latest award year FISAP. The use of 75% is to account for possible reductions in collections in the upcoming 2016-2017 award year.
The ELC Worksheet then calculates Estimated Need for Funds as the amount needed by the institution for the 2016-2017 award year. Note that the worksheet uses two award years’ expenditure amounts to calculate the institution’s one-year (2016-2017) Estimated Need for Funds. If the institution estimates that its need for Perkins Loan funds will be less than the calculated Estimated Need for Funds amount, the institution would input its estimate that will be used in the worksheet to calculate the amount of Excess Liquid Capital.
The ELC Worksheet’s calculation of the Fund’s Excess Liquid Capital is the result of subtracting the calculated Estimated Need for Funds from the calculated Estimated Available Funds.
Specifically, the ELC Worksheet, using information provided by the institution from its FISAPs, performs the following calculations:
Estimated Available Funds = The sum of the Latest Award Year’s Cash on Hand plus 75% of the Latest Award Year’s Collections
Estimated Need for Funds = The sum of the Loans Advanced to Students During the Latest Award Year plus the Administrative Cost Allowance (ACA ) taken from the Fund for the Latest Award Year plus Loans Advanced to students during the Previous Award Year plus ACA taken from the Fund for the Previous Award Year.
The worksheet allows the institution to estimate a lower amount of Estimated Need for Funds than the calculated Estimated Need for Funds
Excess Liquid Capital (ELC) = The difference between Total Estimated Available Funds and the Total Estimated Need for Funds
Amount of ELC That Must Be Returned to the Department
The Proportional Share Worksheet calculates the amount of any Excess Liquid Capital that must be returned to the Department and the amount that must be returned to the institution. The worksheet’s formulas account for changes in the Institutional Capital Contribution (ICC) matching requirement over the years and for any overmatching by the institution. The calculation also takes into account any Federal Capital Contribution (FCC) previously returned by the institution to the Department and any ICC repaid to the institution from the Fund.
Specifically, the Proportional Share Worksheet, using information provided by the institution in its FISAPs, results in the following calculations:
Total Net FCC = Total FCC minus Repayments of FCC to the Department
Total Net ICC = Total ICC minus Repayments of ICC to the institution
Federal Share Percentage = Total Net FCC divided by the sum of the Total Net FCC plus Total Net ICC
Institutional Share Percentage = Total Net ICC divided by the sum of the Total Net FCC plus Total Net ICC
NOTE: The Federal Share Percentage plus the Institutional Share Percentage will equal 100 percent.
Federal Share to Be Returned to the Department = Total Excess Liquid Capital multiplied by the Federal Share Percentage
Institutional Share to Be Returned to the School = Total Excess Liquid Capital multiplied by the Institutional Share Percentage
If you have questions about the information provided in this letter, contact the Campus-Based Call Center at 877/801-7168. Customer service representatives are available Monday through Friday from 8:00 A.M. until 8:00 P.M. (ET). You may also e-mail us at CBFOB@ed.gov.
Jeff Baker, Director
Policy Liaison and Implementation
Federal Student Aid
U.S. Department of Education
1 This was formerly referred to as the “over-time” formula.