The Role of the Guarantor: Proactively Supporting Borrowers During the Credit Crunch
As you may know, for the past several years ASA has put forth the position that the primary role of the guarantor is to proactively support borrowers and help them successfully repay their student loans. The current “credit crunch” has increased fiscal and political pressures on FFELP lenders and produced confusion and concern for schools adjusting to new procedures and fielding questions from worried students. What is the guarantor’s role in supporting borrowers during this time?
Guarantors, as federally funded, neutral third parties, must act as trusted advisors who keep borrowers’ best interests in mind. For instance, borrowers will need timely information about the availability of FFELP funding. They also may need prompt and proactive guidance about filling out new Master Promissory Notes if switching lenders becomes necessary as well as help understanding how complex legislation affects them and their financial obligations. Most importantly, as borrowers become affected by FFELP loan sales to ED and split servicing becomes a reality, they will need to understand how repaying multiple lenders and servicers may affect their repayment. The guarantor community can step in and provide information and guidance during a confusing time for borrowers.
A system that allows guarantors to coordinate borrowers’ personal data and loan information so borrowers don’t lose track of their loan obligations might be one part of the solution. As fiscal strains make it challenging for lenders and schools to provide financial literacy training, guarantors will have a unique role to play in providing debt management training, repayment counseling, default prevention, and rehabilitation services.
By focusing on helping borrowers achieve successful repayment, guarantors are critical to the overall financial health of the FFELP.
Posted by Shelley Saunders on July 09, 2008 at 01:46 PM EST
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Blog Author
Shelley Saunders
Vice President, Strategic Services
Biography
In her current role as American Student Assistance’s vice president of Strategic Services, Shelley Saunders serves as the organization’s primary contact for Congress, as well as for national organizations such as the American Council on Education, the American Association for State Colleges and Universities, the National Association of Student Loan Administrators (NASLA), and others. Her main focus is to educate the public policy making community on the positive results American Student Assistance has realized through its focus on student loan borrower financial Wellness.
In her 12-year career at American Student Assistance, Saunders has played an integral role in several of the organization’s global projects, including designing a new client-server based life-of-the-loan processing system and developing corporate strategy and tactics. She most recently held the position of vice president of Borrower Services.
Saunders has appeared on numerous Clear Channel radio broadcasts in the Washington, D.C. area. Her areas of expertise include the public purpose role of federal student loan administrators, as well as general facts about student loan origination and repayment.
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