Spotlight on the Value of Guarantor Services: Default Prevention
USA Funds® has a history of success in working with education loan borrowers who are behind on their payments, helping them to resolve their loan payment issues. To build on that success, the default prevention specialists who work on USA Funds’ behalf are constantly adjusting their processes to be responsive to the needs of borrowers.
As the economic recession worsened, and USA Funds began to see an increase in requests from lenders for default aversion assistance, USA Funds took a look at how best to promote education loan repayment in a time in which the assistance so clearly is needed. The number of Default Aversion Assistance Requests, or DAARs, jumped by more than 20 percent during the first 10 months of fiscal year 2009 when compared with that time period in 2008.
USA Funds directed the 250 default prevention staff members to make changes in their approach to working with borrowers who are 60 days or more past due in their payments.
“We always want to be supportive of our borrowers,” says Kevin Tharp, USA Funds manager of default prevention and debt management. “We’re always searching for ways to improve and adjust our support strategies for difficult times.”
As the U.S. Congress considers student loan reform legislation, the nation’s guarantors, including USA Funds, are proposing to expand the services they deliver to assist borrowers in the William D. Ford Direct Loan Program. Default prevention is among those services.
Default prevention specialists have redoubled their efforts to help borrowers resolve their payment issues at an early stage in the process. Borrowers facing long-term economic difficulties often can more easily resolve their payment problems early on — before accumulating interest costs compound the problem.
The group also has invested in more advanced technology to locate borrowers who need assistance, and has adjusted the workloads of staff members to most effectively handle requests for help.
And their efforts have paid off. Even in the face of growing need for repayment assistance, through July the default prevention professionals supported by USA Funds had successfully averted default on 93 percent of seriously past-due education loans — helping to prevent more than $20 million in defaults.
Among the individual success stories:
- A California borrower who had been without full-time employment since April 2007 was relieved when a default prevention specialist let him know he qualified for an unemployment deferment of loan payments. He described his contact with the default prevention specialist: “She walked me through the necessary procedures immediately. The entire time I knew I was dealing with a no-nonsense but friendly and reasonable person interested in helping me with the situation.”
- A Florida borrower who was a victim of job loss is among those who received assistance from default prevention specialists who work on behalf of USA Funds. When contacted, she’d been without a job about six weeks. She expressed gratitude to the default prevention professional who assisted her, noting that the “timing was perfect.” She received a forbearance, with payments delayed until February.
- Hurricane Ike left a Texas chiropractor with an office that was underwater and damaged equipment that was costly to replace. To make matters worse, the weak economy ate into his business. So strong was his commitment to getting help with his large consolidation loan, he told the default prevention specialist who assisted him that he’d be willing to “go through any fiery hoop” to get his account up to date. Fortunately he spoke to a default prevention specialist for USA Funds who helped him obtain a forbearance based on his excessive debt. “He thanked me a million times over,” she reports.
Among the other services USA Funds provides to borrowers who are behind in their education loan payments are print and Web resources, such as USA Funds Loan SolutionsSM, an online resource for borrowers with loans that are past-due or in default. That online tool logged 45,000 visits in 2008.