American Student Assistance - Voluntary Flexible Agreement

Voluntary Flexible Agreement

In 2001, ASA became one of four guarantors to enter into a Voluntary Flexible Agreement (VFA) with the US federal government, changing its focus from back-end default collections to an emphasis on delinquency and default prevention. The Voluntary Flexible Agreement enabled Federal Family Education Loan Program guarantors to develop programs and techniques to help borrowers avoid student-loan default and all of its negative consequences. ASA’s Wellness program was designed to deliver debt management information to borrowers at critical points along the life of their loan in order to prevent repayment problems before they start.

Results of these Wellness activities proved that the proactive approach to giving student loan borrowers the right information at exactly the right time were effective in preventing repayment problems. According to ASA studies, graduates who received financial literacy and career information from ASA during the first two years of repayment were half as likely to default as those who did not; since 2002, ASA has beaten national Cohort Default Rates (borrowers newly entering repayment) by more than 46 percent, with 95 percent of the loans in its portfolio in good standing, on average; and ASA saved taxpayers approximately $120 million dollars through prevented student loan defaults between fiscal years 2001 and 2008.

All student loan guarantor VFAs were canceled by the U.S. Department of Education in 2008.