Submitted by Harold Thomas (not verified) on March 20, 2009 - 1:11pm.
Something that was left out of the expanded history provided on guaranty agency roles: in the mid-1970's the Federal Insured Student Loan (FISL- a direct loan program)ran aground due to administrative snafus and underperformance by the federal agency running it, HEW- before ED was created), causing panic among families and concern within the Congress. The states were asked and incented by Congress to step in and help through an expansion in the number of and roles of the guaranty agencies. The states responded, and the access problem went away.
Today, 20 of the 34 guaranty agencies are state agencies that also provide state-sponsored need-based student grants, scholarships, loan forgiveness programs, as well as college access outreach and training to families and schools beginning in middle school. Several run their state's 529 college savings plans, as well as the GEAR UP and College Access Challenge Grant program in their state. They are a comprehensive resource that offers one-stop shopping for families.
Last year, guaranty agencies prevented more than $60 billion in potential student loan defaults through their aversion activities, and they collected on defaulted loans at a higher rate than did the contractors used by the U.S. Education Department(ED). If a loan does default, guarantors pay for 5-25% of the default, a cost-sharing feature that is absent in the direct loan program.
In short, guaranty agencies are those quiet players that help people pay for college while giving the taxpayer the best bang for the buck.
Guaranty agencies
Something that was left out of the expanded history provided on guaranty agency roles: in the mid-1970's the Federal Insured Student Loan (FISL- a direct loan program)ran aground due to administrative snafus and underperformance by the federal agency running it, HEW- before ED was created), causing panic among families and concern within the Congress. The states were asked and incented by Congress to step in and help through an expansion in the number of and roles of the guaranty agencies. The states responded, and the access problem went away.
Today, 20 of the 34 guaranty agencies are state agencies that also provide state-sponsored need-based student grants, scholarships, loan forgiveness programs, as well as college access outreach and training to families and schools beginning in middle school. Several run their state's 529 college savings plans, as well as the GEAR UP and College Access Challenge Grant program in their state. They are a comprehensive resource that offers one-stop shopping for families.
Last year, guaranty agencies prevented more than $60 billion in potential student loan defaults through their aversion activities, and they collected on defaulted loans at a higher rate than did the contractors used by the U.S. Education Department(ED). If a loan does default, guarantors pay for 5-25% of the default, a cost-sharing feature that is absent in the direct loan program.
In short, guaranty agencies are those quiet players that help people pay for college while giving the taxpayer the best bang for the buck.