PHEAA will continue to pay default fee on student loans


PHEAA will subsidize the federal government's mandatory default fee, at least through 2008, on all Stafford, Parent PLUS and Graduate PLUS Loans on behalf of student and parent borrowers who are residents of Pennsylvania or out-of-state residents attending a postsecondary school in Pennsylvania.

PHEAA began waiving this fee, which was formerly known as the guaranty fee or insurance premium, since 1996 when it adopted its industry-leading Zero Guaranty Fee.  This innovative program has saved student loan borrowers nearly $212 million in up-front costs.

The Higher Education Reconciliation Act of 2005 requires all guarantors to deposit one percent of the loan amount to cover potential costs associated with insuring federally guaranteed student loans. PHEAA has consistently covered these costs on behalf of its students and their families to help them afford a higher education while incurring less debt.

“We've been using our resources to support Pennsylvania's student financial aid needs for more than 43 years,” explained Dick Willey, PHEAA president and CEO.  “By consistently waiving this default fee, that so many others charge, we're making higher education an affordable option for everyone - - especially for families in Pennsylvania. Add this to our many scholarship, grant, loan forgiveness and low-cost student loan programs and you'll find that Pennsylvania enjoys a financial aid advantage that no other state can match.”

By subsidizing the federal default fee again for the 2007-08 academic year, PHEAA estimates it will save students in excess of $39 million that can immediately be used to help pay for their educational expenses.  These students and their families can also benefit from the many low-cost student aid programs provided by PHEAA.

Additional information on PHEAA's programs and services can be found at


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