Nation's leading guarantor helps borrowers resolve default, restore good credit
USA Funds recovers $362 million through loan rehabilitation
INDIANAPOLIS — USA Funds®, the nation's leading education-loan guarantor, reports that it dramatically increased the dollars of federal education-loan defaults that it resolved during the past fiscal year through loan rehabilitation. According to figures from the U.S. Department of Education, USA Funds recovered nearly $362 million through loan rehabilitation during fiscal 2004. That figure represents a 43-percent increase from the previous year and is greater than the combined loan-rehabilitation volume for the next 16 guarantors that are the most active in loan rehabilitation.
"Loan rehabilitation offers borrowers who have previously defaulted on their loans the opportunity to resolve their defaults and clean up their credit records," said Carl C. Dalstrom, USA Funds president and CEO. "Because a borrower must make 12 consecutive monthly payments to qualify, loan rehabilitation is more difficult to complete than other default remedies. In the end, it is the most-beneficial option for many borrowers, however."
During fiscal 2004, USA Funds increased its overall default recoveries by 12 percent to nearly $1.1 billion and also increased its overall recovery rate to nearly 35.5 percent from the previous year's rate of 30 percent of its total portfolio of defaulted loans. USA Funds' recovery rate is well above the average of 24.6 percent for all other guarantors.
As a result of its emphasis on rehabilitating defaulted loans, loan rehabilitation accounted for 33 percent of USA Funds' default collections during fiscal 2004, compared with 26 percent for fiscal 2003.
"USA Funds' first priority is preventing loan defaults," Dalstrom said. "But for borrowers who end up in default, USA Funds offers a second chance to fulfill their loan-payment obligations and the opportunity to start fresh with a clean credit slate. At the same time, we're recovering dollars for federal taxpayers by transforming loan defaults into loans in repayment."