American Student Assistance^®, the federal student loan guarantor with proven default prevention results, has once again lowered its annual Cohort Default Rate, according to draft data just released by the Department of Education.

ASA's draft CDR for federal fiscal year 2006 stands at just 1.48 percent, down from 1.57 percent in 2005. ASA has maintained one of the lowest CDRs among all guarantors for several years running. The most recent national CDR for 2005 for all other guarantors stands at 4.6 percent, three times as high as ASA's rate.

The Education Department calculates CDRs annually for each higher education institution, student loan lender, and guarantor that participates in the Federal Family Education Loan Program. CDRs are currently based on the percentage of students who enter repayment and default before the end of the next fiscal year.

The most recent CDR is for fiscal year 2006 and is the percentage of borrowers who began repaying their loans between October 1, 2005 and September 30, 2006, and who defaulted before September 30, 2007. The Department releases draft default rates each winter and final rates each fall.

The CDR has value because statistics show that borrowers who make monthly payments on time in the first years of repayment are much less likely to default later on.

New Financing Model, Research and Development Key to CDR Success

ASA credits its prevention-first business model, as well as its ability to conduct research and development under its Voluntary Flexible Agreement with the Department, for its CDR success.

VFAs, created by Congress during the last reauthorization of the Higher Education Act in 1998, are agreements between a FFELP guarantor and the Department of Education that transition the guarantor financing structure from one focused on default collection to proactive delinquency and default prevention.

"Our low CDR is further proof that aligning guarantor incentives with default prevention brings positive results for students and families," said Paul Combe, ASA's president and CEO. "The priority of the federal student loan program, and the best role for the guarantor, should be helping students manage their education debt before repayment problems occur."

Specifically, ASA points to Journeys, its successful outreach program for recent graduates, as having a direct impact on its CDR. Journeys, is a series of quarterly debt management mailings, in conjunction with personal phone calls from ASA counselors, for college graduates during the first two years of repayment.

ASA developed Journeys using Customer Relationship Management techniques to measure response rates and effectiveness. ASA's initial research during the development of Journeys showed that contacted borrowers experienced 50 percent fewer defaults than borrowers with no contact, which led to a full-scale implementation of the program for all students in ASA's portfolio approaching the start of repayment.

"ASA's financing model affords us the latitude to invest in research to identify best practices for affecting borrower repayment behavior," Combe said, "which makes us a more effective partner in helping the Department fulfill its mission to help students succeed."

About American Student Assistance

American Student Assistance is a private, federally funded, nonprofit organization that helps students and parents manage higher education debt. Its unique Wellness programs give student loan borrowers the support they need to avoid default. Incorporated in 1956, ASA was the nation’s first private student loan guarantee agency and a model for the federal student loan program. As an administrator of the Federal Family Education Loan Program, ASA delivers quality default prevention, guarantee, origination and fund delivery services to students, parents, schools and lenders nationwide. ASA guarantees more than $2 billion in student loans annually and currently manages a student loan portfolio worth more than $45 billion. Based in Boston, American Student Assistance employs more than 700 associates nationwide and has been recognized by the Boston Business Journal and the Boston Globe as one of the region’s best places to work. Visit www.amsa.com or call 617.728.4631 for more information.