Education-loan service providers announce loan-consolidation, rehabilitation agreements
USA Funds, Southwest Student Services Corporation Expand Ties
INDIANAPOLIS and PHOENIX — USA Funds®, the nation's leading education-loan guarantor, and Southwest Student Services Corporation® (Southwest), one of the nation's largest education-loan originators, secondary markets and servicers, have announced agreements that strengthen their working relationship. The two organizations have entered into agreements to collaborate on Federal Consolidation Loans and rehabilitation loans to assist education-loan borrowers who require special loan-repayment arrangements.
The agreements reflect the continued commitment of the two education-loan service providers to benefit the Federal Family Education Loan Program (FFELP), the largest federal source of financial aid for higher education.
Under the agreements, USA Funds will waive one of its standard requirements for the guarantee of consolidation loans. USA Funds normally requires that consolidation-loan borrowers must have at least one active loan guaranteed by USA Funds. Due to the significantly lower default experience on consolidation loans originated by Southwest affiliates, USA Funds is waiving this requirement on Federal Consolidation Loans originated by Southwest affiliates. The agreement is expected to generate more than $20 million in monthly consolidation-loan volume under the USA Funds guarantee.
In addition, USA Funds and Southwest have agreed that a Southwest affiliate, Arizona Educational Loan Marketing Corporation (AELMAC), will become one of USA Funds' preferred lenders for rehabilitation loans. These loans permit borrowers who have previously defaulted on their federal education loans to return to repayment status. After making 12 consecutive voluntary, on-time monthly payments, the borrower's defaulted loans are sold to a lender, which issues a new loan. The default is removed from the borrower's credit report, and the account is restored to repayment status. Under the agreement, AELMAC is expected to receive at least 20 percent of USA Funds' rehabilitation-loan volume.