Guaranty agencies are state or private nonprofit agencies that administer the federal guaranteed loan program. The agencies insure federal student loans against default and pay off lenders when borrowers default. They also try to collect from borrowers. Guaranty agencies will still be around for a while even though the FFEL program was eliminated as of June 30, 2010. The agencies are still servicing and collecting on their existing FFEL loans. Many also have contracts to service Direct Loans.
Posted in: A. Understanding Student Loans