Action projected to save students more than $22 million during next academic year
USA Funds to subsidize fee on PLUS loans for graduate students
INDIANAPOLIS — USA Funds®, the nation’s leading education-loan guarantor, announces a change in its policy regarding the federal default fee.
Effective for loans guaranteed on or after July 1, USA Funds will pay the 1-percent federal default fee on Federal PLUS loans that it guarantees to graduate and professional students, if the lender buys down the fee on all of the lender’s Federal Stafford loans guaranteed by USA Funds.
The policy is projected to save student-loan borrowers more than $22 million during the 2007-2008 academic year. Students are expected to reap additional savings from lenders that elect to pay the federal default fee on the borrower’s behalf on Stafford loans.
“Our current fee policy has had the effect of encouraging lenders to subsidize the federal default fee on Stafford loans that USA Funds guarantees, and as a result, nearly 90 percent of USA Funds’ guarantee volume of Stafford and PLUS loans after July 1, 2006, has been covered by a fee buydown,” said Carl C. Dalstrom, USA Funds president and CEO. “Working with our lender-partners, we are pleased to be able to contribute to reducing the cost of borrowing for college.”
Under a federal law enacted last year, guarantors such as USA Funds are required to collect and deposit into their federal reserve funds a 1-percent fee on new Stafford and PLUS loans that they guarantee. The reserve fund is used to reimburse lenders in the event a borrower defaults on a loan and in certain other circumstances, and to support the guarantor’s diligent efforts to prevent student-loan defaults.
In the absence of legislative or regulatory changes or other unexpected contingencies that would significantly affect USA Funds’ financial condition, USA Funds intends for the new fee policy to remain in effect at least through the 2007-2008 academic year. The policy may be extended thereafter.