USA Funds Prevents $26.3 Billion in Student Loan Defaults

Default aversion efforts maintain 93 percent success rate

Oct 26, 2010, 09:48 ET from USA Funds

INDIANAPOLIS, Oct. 26 /PRNewswire/ -- USA Funds® reports that it prevented $26.3 billion in defaults on nearly 1.7 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 $25 billion and student loan borrowers a projected $8.8 billion in additional costs associated with student loan default.

"The economic downturn has significantly increased the number of student loan borrowers who are having difficulty making their monthly payments," said Carl C. Dalstrom, USA Funds president and CEO. "USA Funds invests significant resources in contacting and counseling these borrowers about the options for resolving their payment problems."

Those options include scheduling a payment, flexible repayment plans, and deferment and forbearance to temporarily postpone or reduce a borrower's monthly payments.

As part of its default prevention efforts, USA Funds supports a team of more than 250 full-time professionals who work with student loan borrowers who are behind in their payments. During the past year this default prevention team made nearly 85 million phone calls and sent 3 million pieces of correspondence to borrowers.

One borrower who benefitted from USA Funds' default prevention assistance was Amy St. Martin, a Massachusetts resident who had fallen behind on her student loan payments due to unemployment and health issues. A default prevention specialist for USA Funds counseled St. Martin about the income-based repayment option, which limits a borrower's monthly payments to a percentage of the borrower's discretionary income. Since that discussion in late 2009, St. Martin has remained current on her student loan payments.

"The person on the other line approached the situation with empathy, and more importantly, with the experience and the background to put things in perspective for me," St. Martin said.  "He took a challenging situation, gave it some structure and said, 'We can work with this.' To have someone say that was a breath of fresh air."

To promote successful student loan repayment, USA Funds supports a wide range of additional services, including USA Funds Life Skills®, a comprehensive online personal finance curriculum for college students; debt management and default prevention consultations and workshops for higher education institutions; support for borrower counseling programs; and online and print resources to assist student loan borrowers.

Headquartered in Indianapolis, USA Funds is a nonprofit corporation that works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services. For more information about USA Funds, visit