Guaranteed Student Loans

Analysis of Insurance Premiums Charged by Guaranty Agencies Gao ID: HRD-88-16BR October 7, 1987

In response to a congressional request, GAO reviewed the insurance premium rates that guaranty agencies charge student borrowers under the Guaranteed Student Loan Program.

GAO found that: (1) the agencies received $83 million in premiums in fiscal year (FY) 1986, with effective insurance rates ranging from .064 to 2.87 percent; (2) 10 of the agencies lowered their insurance rates, while 7 raised their rates; (3) the agencies would have earned $70 million, reducing premium income by $13 million, if they had used the new rates in FY 1986; and (4) if the agencies had charged the maximum rate of 3 percent, they would have earned $91 million more than they received in FY 1986, and $104 million more than with their current insurance rates, and exceeded by $46 million the administrative cost subsidies that they received in FY 1986.



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