Reminder: New Federal Default Fee Policy in Effect

As a reminder to schools and lenders, USA Funds^® advises its student loan partners of a change in its federal default fee policy, effective for loans guaranteed beginning Feb. 1.

USA Funds subsidizes one-half of the 1 percent federal default fee on Federal Stafford and Grad PLUS loans that it guarantees, when the originating lender buys down the other half of the fee for borrowers attending the following schools:

• All schools located in USA Funds’ designated and key states of Arizona, California, Florida, Hawaii, Indiana, Kansas, Maryland, Mississippi, Nevada and Wyoming.

• All other schools with final 2005 cohort default rates of less than 7 percent.

Based on lenders that had advised USA Funds of their participation in its buydown policy beginning Feb. 1, USA Funds projects that the federal default fee will be paid on the borrower’s behalf on approximately 70 percent of the new Stafford loans and 80 percent of the new Grad PLUS loans that USA Funds guarantees.

“We’re pleased by the response of many of our lender-partners to ensure that most of our student loan borrowers benefit from reduced-fee loans, while permitting USA Funds to continue its significant investment in valuable default prevention and access and outreach services,” said Denise Feser, USA Funds senior vice president, customer relations.

Education lenders that wish to participate in USA Funds’ federal default fee buydown but have not yet done so can review additional details.