New America Releases In-Depth Report on Federal Student Loan Guaranty Agencies

WASHINGTON, DC--Today the New America Foundation's Education Policy Program released "Rethinking the Middleman: Federal Student Loan Guaranty Agencies," by Benjamin Miller. The policy paper provides an overview of the history and current responsibilities of guaranty agencies, complex entities that provide administrative functions within the Federal Family Education Loan (FFEL) Program. The paper also provides recommendations for policymakers to reform these agencies' current functions. The paper comes at an important time, as Congress considers proposals put forth by the Obama administration to significantly change the federal student loan programs.

"Guaranty agencies are little understood by the general public but receive over a billion dollars in federal subsidies each year and have significant political clout at the local and national level," Miller said. "Understanding the program's current design flaws, which leave the program extremely vulnerable to fraud and abuse, is crucial for comprehending the ongoing debate over proposed reforms to the Federal Family Education Loan Program."

The report includes the following:

• The history of guaranty agencies and how their roles have changed and evolved over time;
• How federal payments to guaranty agencies work at cross purposes and can undermine policy goals;
• The negative consequences of affiliations between guaranty agencies and student loan companies for borrowers and FFEL Program integrity; and
• Options for policymakers to reform these agencies.

The full report is available at NewAmerica.net.

Please contact Erin Drankoski with interview requests at 202-997-8727 or drankoski@newamerica.net.