Action expected to save student- and parent-borrowers $69 million annually

USA Funds Extends Zero Guarantee Fee on Federal Education Loans

INDIANAPOLIS—USA Funds^® announces the extension of its practice of waiving the 1-percent guarantee fee to parent- and student-loan borrowers. The action by the nation's largest student-loan guarantor will save students and parents who borrow under the Federal Family Education Loan Program (FFELP) a projected $69 million during the next year.

"We are able to offer these savings to college students and their parents because our strong default-aversion efforts continue to reduce our student-loan default rates to record-low levels," reported Carl C. Dalstrom, USA Funds president and CEO.

The zero guarantee fee applies to all Federal Stafford and Federal PLUS loans guaranteed by USA Funds on or after May 1, 1999, for students, or for parents of undergraduates, attending any academic institution that participates in the FFELP.

Federal law allows guarantors to collect up to 1 percent as an insurance premium from each education loan that they guarantee. These guarantee fees are used to pay lenders in case of loan defaults and to support the guarantor's default-prevention efforts.

Because USA Funds will not deduct a guarantee fee from a borrower's loan amount, parent- and student-loan borrowers will keep more money to pay education expenses.

"By waiving the guarantee fee, we are helping to ease the college-cost burden on students and parents," Dalstrom said. "We plan to offer this benefit to borrowers as long as favorable conditions make it feasible to do so," he added.