March 5, 1999

Guarantee Agencies Are Furious Over Education Department Policy on Defaults

By STEPHEN BURD

Leaders of student-loan guarantee agencies are outraged over a U.S. Education Department plan that they say would discourage them from using a key tool to prevent borrowers from defaulting on their student loans.

The issue is at what point the federal government will pay a new "default aversion" fee to the 36 guarantee agencies when they prevent delinquent borrowers from going into default. When it renewed the Higher Education Act last

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