Success in Preventing Default Saves Taxpayers Millions
Madison, Wis. - Great Lakes Higher Education Guaranty Corporation (Great Lakes) achieved a claims rate of 0.62 percent for federal fiscal year 2006 - less than half the national average rate of 1.57 percent. This marks the second consecutive year in which Great Lakes achieved the lowest claims rate among guarantors in the Federal Family Education Loan Program (FFELP).
The claims rate, also known as the reinsurance trigger rate or annual default rate, is widely recognized as a measure of a guarantor's success in preventing default. It represents the ratio of the amount of reinsurance claims paid during a federal fiscal year to the guaranty agency's total amount of loans in repayment at the end of the preceding federal fiscal year.
Great Lakes' ability to maintain a low claims rate saves taxpayers millions of dollars each year by reducing claim payments from the U.S. Department of Education (ED). It also directly benefits borrowers, schools and lenders. Great Lakes' continued success can be attributed to business model changes made possible by its Voluntary Flexible Agreement (VFA) with ED. Under its VFA, Great Lakes is compensated on its success in preventing defaults - not on its success in post-default collections. This student success focus provides Great Lakes with incentive to continually seek, implement and refine default prevention techniques.
"Our continued ability to achieve a claims rate that is well below the national average demonstrates that the default prevention focus of our VFA is the right focus for guarantors, schools, lenders and taxpayers," said Richard D. George, Great Lakes' President and CEO. "Our business model puts the needs of student loan borrowers first - exactly where they should be."
For more information about Great Lakes' students-first initiatives, please contact Amy Kerwin at (608) 246-1785.
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About Great Lakes
Great Lakes Higher Education Guaranty Corporation is the designated guarantor for Minnesota, Ohio, Wisconsin, Puerto Rico, and the U.S. Virgin Islands. Its affiliated group of companies is one of the nation's largest providers of student loan services. The affiliated group currently interacts with some 2,700 schools and 1,400 lenders in all 50 states, Puerto Rico, and the U.S. Virgin Islands. The group holds guarantees on more than $35 billion in FFELP loans and services student loans with an aggregate outstanding balance of more than $32 billion for over two million borrowers. Great Lakes' affiliated group is headquartered in Madison, Wisconsin, and has operating centers in Columbus, Ohio and St. Paul, Minnesota and customer service and development sites in Eau Claire and Boscobel, Wisconsin, and Oak Brook, Illinois. Great Lakes' mission is assurance of cost-effective enablement of educational access. For more information, visit www.GreatLakesGuaranty.org.
Posted 02/28/07 to www.NASFAA.org. Posting of information in Constituent News is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
