Nation's largest guarantor records its lowest default rate ever

USA Funds cuts student-loan-default rate by 26 percent

INDIANAPOLIS — USA Funds^®, the nation’s leading education-loan guarantor, has posted a 26-percent year-to-year reduction in its student-loan default rate. According to cohort default-rate figures released by the U.S. Department of Education, USA Funds’ default rate fell to 4.5 percent for the 2001 cohort of student-loan borrowers, compared with 6.1 percent for the previous year.

This figure represents the lowest default rate ever recorded by USA Funds.

The cohort default rate reflects the percentage of borrowers who entered repayment during the 2001 federal fiscal year and defaulted on their loans by Sept. 30, 2002.

"This substantial decrease in USA Funds' default rate reflects our comprehensive default-prevention and debt-management initiative," said Carl C. Dalstrom, USA Funds president and CEO. "This initiative helps borrowers successfully repay their education-loan debt and assists postsecondary institutions in strengthening their default-prevention efforts."

Key components of USA Funds' initiative include the following items:

Successful default-aversion activities. Default-aversion activities undertaken on behalf of USA Funds prevent default on nearly 93 percent of seriously past-due education-loan accounts. During fiscal 2002, these efforts contributed to the aversion of nearly $10.7 billion in potential loan defaults.

Support to postsecondary institutions. USA Funds' team of debt-management consultants offers free consultations and workshops to help postsecondary institutions bolster their default-prevention efforts.

Innovative financial-literacy program. USA Funds Life Skills^SM, an innovative financial- literacy program, is at various stages of implementation at more than 400 postsecondary institutions nationwide. The multimedia program helps schools teach their students time- and money-management skills and prepare student-loan borrowers for successful repayment of their loans.

Best practices in default prevention. USA Funds' Default-Prevention Council brings together campus representatives and default-prevention experts to develop tactics for schools to use in lowering their default rates. The council worked with USA Funds' debt-management consultants to create an online manual on best practices in debt management.

Solving the student-retention puzzle. USA Funds is helping schools enhance their persistence and graduation rates, thereby contributing to lower default rates. This initiative includes online resources that schools can use to enhance student retention.

Default Management System. This PC-based software permits schools to carry out customized letter, e-mail and telephone campaigns to student-loan borrowers to encourage successful loan repayment.

Borrower Debt-Management Information Service. This service permits schools to arrange for correspondence to be sent to their student-loan borrowers, advising them of their loan-repayment obligations and providing an estimate of their anticipated monthly payments.

Web access for borrowers with payment problems. Borrowers whose payments are 60 days or more past due can visit the USA Funds Web site to access their account information, contact information for assistance and options for resolving their past-due accounts.

"We believe that no other student-loan guarantor offers the scope of default-prevention services that USA Funds delivers," Dalstrom said.