The ASA Guarantee Does Make a Difference
Aren't all guarantee agencies just about the same? No, they are not!
The vast majority of guarantee agencies make money collecting defaulted student loans. At ASA, under our Voluntary Flexible Agreement (VFA) we only make money when we keep a borrower in repayment. In fact, we are so committed to the Wellness philosophy, that in our recent re-negotiation of the VFA with the Department of Education we proposed to enter into "Risk Sharing." Under this concept, not only will we lose money when a loan defaults, we will pay 5 percent of the lender's claim out of our own funds, and not federal funds. We at ASA now have a financial stake in making Wellness work.
A lot of the data I have shared with you does indicate that our Wellness experiments work. But here is one of the most convincing stories. I told you about how some of our school partners participate in our "Journeys" program by offering their school logos to "brand" our e-mails and literature (see 4/18/06 entry). It was our belief that these schools would most benefit from the Wellness experiments since the students would recognize the source of the information. So did it have an impact?
Eight institutions have partnered with ASA for several years of "Journeys" materials giving us a longer timeframe to track the impact of the programs. (Currently over 20 schools participate) Although all eight of these schools used ASA for the vast majority of their loans, they did not use ASA exclusively, and do process some loans with other guarantors. They represent a range of private, public and proprietary schools. We examined the 2003 federal cohort default rate for all eight institutions. Their 2003 federal cohorts ranged from 1.3 percent to as high as 8.6 percent. We then simulated a recalculation of the default rate on just the portion of ASA guaranteed loans. In each and every case, the default rate for the ASA loans dropped under the federal cohort! The 2003 default rates dropped with a range of .04 percent to a high of just 6.7 percent. For one institution, their default rate on the ASA only guaranteed loans dropped 1.9 percent under the federal cohort of all loans.
We believe that given the opportunity to work with borrowers, and keeping them from consolidating out of Wellness (see 3/20/06 entry) we can make a positive impact on student behavior and repayment. Any comments?
Best,
Duane
Posted by Duane Quinn on May 11, 2006 at 02:46 PM EST
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Blog Author
Mike Ryan
Vice President of Borrower Services
Biography
Michael T. Ryan is Vice President of Borrower Services for American Student Assistance, a position he has held since joining ASA in February, 2003. Mr. Ryan heads ASA’s Borrower Services Division, which is responsible for all aspects of the management and delivery of service to borrowers in ASA’s education loan portfolio, including all default prevention and recovery efforts.
In his 20-plus year career in higher education financing, Mr. Ryan has held key management positions at the Massachusetts Educational Financing Authority (MEFA), and Key Education Resources (formerly Knight Tuition Payment Plans). As MEFA’s Associate Director for Programs and Operations, Mr. Ryan facilitated MEFA’s entry as a Federal Family Education Loan Program (FFELP) provider. He also played an instrumental role in the introduction of the U. Fund, (MEFA’s Section 529 College Investing Plan), managed MEFA’s U. Plan (Prepaid Tuition Program), and was responsible for the operation of MEFA’s loan programs.
While at Knight and Key, Mr. Ryan held progressively responsible management positions, from Account Manager to Senior Vice President.
Mr. Ryan is a graduate of Merrimack College.
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