Tuesday, October 20, 2009

USA Funds Prevents $23.7 Billion in Student Loan Defaults

/PRNewswire/ -- USA Funds®, the nation's leading education loan guarantor, reports that it prevented $23.7 billion in defaults on more than 1.5 million past-due federal student loan accounts during the fiscal year ending Sept. 30. USA Funds' default prevention efforts were successful in averting default on more than 93 percent of loan accounts on which payments were reported by the lender as being 60 days or more past due.

USA Funds' default prevention efforts saved U.S. taxpayers an estimated $22.5 billion and student loan borrowers a projected $7.8 billion in additional costs associated with student loan default.

"The severe economic recession has generated a significant increase in student loan payment delinquencies," said Carl C. Dalstrom, USA Funds president and CEO. "Despite these challenges USA Funds has worked hard to maintain its default prevention success rate to spare taxpayers and student loan borrowers the expense of default."

As part of its default prevention efforts, USA Funds supports a team of 250 full-time professionals who work to contact student loan borrowers who have fallen behind in their payments and counsel them about the options for resolving their payment issues. Those options include scheduling a payment; flexible repayment plans, including income-based repayment options; and deferment and forbearance to temporarily postpone or reduce a borrower's monthly payments.

Last year this default prevention team made more than 85 million phone calls and sent 2.7 million pieces of correspondence to borrowers to assist them in resolving their student loan payment issues.

To promote successful student loan repayment, USA Funds supports additional services, including online borrower counseling programs, personal finance education for college students, as well as default prevention support to higher education institutions.

If, in spite of these efforts, borrowers default on their loans, federal law requires USA Funds to continue to pursue recovery of outstanding amounts owed taxpayers. During the past fiscal year, USA Funds recovered more than $1.2 billion from borrowers in default on their loans. This figure includes more than $459 million in rehabilitated loans, which permit borrowers who previously defaulted on their federal student loans to restore their accounts to repayment and improve their credit record.

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