ERIC Number: ED228975
Record Type: Non-Journal
Publication Date: 1983-Mar
Study of the Insurance Premium Charged to Borrowers under the Guaranteed Student Loan Program. Report No. 3.
Touche Ross and Co., Washington, DC.
Insurance premiums being charged to borrowers under the Guaranteed Student Loan (GSL) program were studied to determine if the rate exceeded the rate necessary to protect the reserves of the insurer. Attention was directed to whether historical changes in the GSL program have affected insurance premiums. Guaranty agency's sources and uses of funds were also examined in an attempt to measure the need of insurance premiums. Finally, the amount of insurance premiums needed by guaranty agencies for their reserves in order to pay default claims was investigated. Findings include the following: the term "insurance premium" is misleading, since the large percentage of insurance premium funds are not used to pay default claims; the 1976 Higher Education Amendments decreased significantly the need to charge the maximum insurance premium rate to protect against defaults; and although the current reinsurance mechanism provides 100 percent reinsurance, guaranty agencies are still governed by lenders' and bondholders' perceptions to hold reserves in order to guarantee against the unlikely event of uncompensated defaults. Recommendations are offered regarding procedures and policies governing the financing of guaranty agencies. Appendices include information on guaranty agency sources and uses of funds. (SW)
Publication Type: Reports - Evaluative
Education Level: N/A
Sponsor: National Commission on Student Financial Assistance, Washington, DC.
Authoring Institution: Touche Ross and Co., Washington, DC.
Identifiers - Laws, Policies, & Programs: Guaranteed Student Loan Program