Reinsurance Trigger Rate

The Education Department pays reinsurance to guarantors depending on their “trigger rate.” The trigger rate represents the number of loans that default in a fiscal year as a percentage of the number of loans in repayment in that same fiscal year.

The reinsurance trigger rate is used to monitor a guarantor’s success at default aversion. The lower a guarantor’s trigger rate, the better its success in default prevention:

ASA’s annual Portfolio Wellness Fee provides a financial incentive associated with improving the default rate on ASA guaranteed loans as compared to the FFELP industry on a national basis. In the first year of our VFA, the ASA Trigger Rate was compared to the national trigger rate (exclusive of ASA):

The same calculation has been performed each subsequent year to determine ASA’s Annual Trigger Index. Our annual Portfolio Wellness fee, a variable fee calculated annually, is increased by 0.25 basis points for each 1-percentage point improvement in our Annual Trigger Index as compared to the Baseline Trigger Index.

Since implementing its VFA, ASA has consistently maintained a trigger rate below the national average.