Student Loans - Close Relationship With Borrowers Helps Lower Defaults

A recent report released by the U.S. Department of Education indicated that the cohort default rate for College Foundation, Inc. (CFI) with respect to borrowers whose loans were guaranteed by the North Carolina State Education Assistance Authority (SEAA) during the fiscal year 2008 was just 2.8%, which is one of the lowest recorded default rates in the US. The cohort default rate figures recorded for the fiscal year 2007 by CFI was 2.9%, which means that CFI saw a decrease of 0.1% in its cohort default rate from the fiscal year 2007 to the fiscal year 2008. Over the same period, the national default rate recorded an increase of 0.3%, from 6.7% to 7.0%.

“I’m not surprised to hear that CFI has again achieved such a low cohort default rate for borrowers with loans guaranteed by the SEAA. Nonprofit CFI has always worked very closely with the SEAA to provide personal attention and financial education to borrowers,” said Shirley Ort, the Associate Provost and Director of Scholarships and Student Aid at the University of North Carolina at Chapel Hill, who added, “Another benefit this group of students gained from borrowing with CFI was that CFI both loaned them money and then collected from them when they went into repayment. During this period in the loan industry, many other lenders separated these functions – which made it much more difficult for students to figure out where to send their payments. The close connection between CFI and its borrowers is an obvious reason their borrowers repay their loans at such a high rate.”