USA Funds will soon be shedding a decades-long legacy as a student loan guarantor.
The Fishers-based not-for-profit announced Wednesday that it will transfer ownership of two affiliates—United Student Aid Funds and Northwest Education Loan Association—to Madison, Wisconsin-based Great Lakes Higher Education Corp. on Jan. 1.
United Student Aid Funds is the nation's largest education loan guarantor, guaranteeing federally funded student loans initiated by private companies. Essentially, guarantors insure lenders against nonpayment by borrowers. The group also helps student loan borrowers with default-prevention counseling.
IBJ reported last year that USA Funds was winding down its role as a student loan guarantor due to federal student loan changes. A 2010 federal law contributed to the shrinking of the guarantor business as student loans are now funded directly from the federal Treasury. USA Funds hasn’t guaranteed any new loans for six years.
“We are proud of our service as a student loan guarantor during the past half century, supporting $250 billion in financing to help more than 22 million students and parents pay for a college education,” said USA Funds President and CEO Bill Hansen in written statement. “But the dramatic changes sweeping the higher education landscape and the emerging needs of our nation’s workforce and economy compel us to direct our full attention to helping more students succeed in postsecondary education and launch into rewarding careers and fulfilling lives.”
United Student Aid Funds and NELA, which have combined portfolios of about $50 billion, will “continue to operate as individual guarantors under the new ownership, ensuring uninterrupted service to student loan borrowers,” according to the group.
“All of their current relationships and commitments to lenders, servicers, schools, and the U.S. Department of Education will remain unchanged,” the release said.
Twenty-six employees of USA Funds who worked in the guarantor business will remain in Indianapolis, but as employees of Great Lakes. USA Funds has about 150 employees total, according to spokesman Bob Murray.
The change means that parent company USA Funds will focus on a new mission of improving college preparation and completion.
IBJ reported last year that their new focus is called “completion with a purpose.”
Through philanthropy and their own programs, they hope to address the so-called “skills gap” and help college students learn what their future employers need in their employees.