The New America Foundation released a report yesterday looking closely at the confusing and slightly mysterious role of guaranty agencies in the federal student loan program. These non-profit entities play several roles in administering federal loans - some are vestigial and no longer necessary for the federal loan program to function, while others are ill-defined and poorly monitored. And, as the report describes, the payment structure for the agencies' various functions can run counter to the interests of taxpayers and borrowers.
The report makes it clear that it is time to overhaul the role of guaranty agencies in the federal loan program in order to remove unnecessary activities (and federal payments for them) and focus guaranty agencies' energies and money on a truly important task - helping students repay their loans and preventing students from defaulting.
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