USA Funds prevents $25.4 billion in student loan defaults

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Default aversion efforts achieve better than 93 percent success rate

With more than a $1 trillion in outstanding student loan debt and high unemployment rates, many student loan borrowers are struggling to make their loan payments.

USA Funds® reports that it prevented $25.4 billion in defaults on 1.4 million past-due federal student loan accounts during the fiscal year ending Sept. 30. USA Funds’ default prevention efforts succeeded in averting default on more than 93.3 percent of loan accounts on which payments were reported by the lender as being 60 days or more past due.

USA Funds’ efforts saved U.S. taxpayers an estimated $22.9 billion and student loan borrowers a projected $8.5 billion in additional costs associated with student loan default.

“With more than a $1 trillion in outstanding student loan debt and high unemployment rates, many student loan borrowers are struggling to make their loan payments,” said Carl C. Dalstrom, USA Funds president and CEO. “USA Funds invests in intensive efforts to contact and counsel these borrowers to resolve their loan payment issues.”

The options for borrowers include flexible repayment plans — including a plan that limits monthly payments to a percentage of a borrower’s discretionary income — as well as deferment and forbearance to allow borrowers to temporarily postpone or reduce their monthly payments.    

USA Funds supports a team of nearly 200 full-time professionals who work with student loan borrowers who are behind in their payments. During the past year, this default prevention team made 163 million phone calls and sent 2.6 million pieces of correspondence to borrowers.

Although the most recent national student loan default rate — the two-year cohort default rate —rose to 9.1 percent, the comparable default rate on loans guaranteed by USA Funds fell to 5.2 percent, from the previous year’s rate of 6.9 percent.

To promote successful student loan repayment, USA Funds supports a wide range of additional services, including USA Funds Borrower Connect™, a Web-based tool that helps colleges contact and counsel their student loan borrowers, and USA Funds Borrower Connect InTouch, a staffing solution for colleges that lack the resources to carry out borrower communications. USA Funds also provides USA Funds Life Skills®, a comprehensive online personal finance and student success curriculum for college students; debt management and default prevention consultations for higher education institutions; and online and print resources to assist student loan borrowers.

If, in spite of these intensive default prevention efforts, a borrower defaults, USA Funds continues to work with the borrower to resolve the default and recover amounts owed U.S. taxpayers. During fiscal 2012, USA Funds recovered more than $1.4 billion on defaulted loan accounts. Nearly $794 million of these default resolutions involved loan rehabilitation, which has the added benefit of clearing the student loan default from the borrower’s credit record.

Headquartered in Indianapolis, USA Funds is a nonprofit corporation that works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services. For more information about USA Funds, visit

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Bob Murray
USA Funds
(317) 806-1283
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