USA Funds Prevents $26.5 Billion in Student Loan Defaults

Default aversion efforts maintain 93 percent success rate

Oct 25, 2011, 10:20 ET from USA Funds

INDIANAPOLIS, Oct. 25, 2011 /PRNewswire/ -- USA Funds® reports that it prevented nearly $26.5 billion in defaults on nearly 1.6 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.

"These hard economic times are challenging many student loan borrowers to keep up with their monthly payments," said Carl C. Dalstrom, USA Funds president and CEO. "Fortunately, federal student loans offer a variety of options to help borrowers cope with payment problems. USA Funds invests significant resources in contacting and counseling these borrowers about their options."

These options include flexible repayment plans — including a plan that limits monthly payments to a percentage of a borrower's discretionary income — as well as deferment and forbearance to allow borrowers to temporarily postpone or reduce their monthly payments.

As part of its default prevention efforts, USA Funds supports a team of more than 220 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 88 million phone calls and sent 2.7 million pieces of correspondence to borrowers.

Although the most recent national student loan default rate rose to 8.8 percent, the comparable default rate on loans guaranteed by USA Funds fell to 6.9 percent.

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 for higher education institutions; and online and print resources to assist student loan borrowers.

If, in spite of these intensive default prevention efforts, a borrower defaults, USA Funds continues to work with the borrower to resolve the default and recover amounts owed U.S. taxpayers. During fiscal 2011, USA Funds' default recovery efforts collected more than $1.3 billion. Nearly $652 million of these default resolutions involved loan rehabilitation, which has the added benefit of clearing the student loan default from the borrower's credit record.

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