USA Funds Moves to Further Focus on Education Philanthropy and Investing

Gayathri | Thursday, December 8, 2016 4:56 PM IST

USA Funds, which has played a growing role in education philanthropy and investing in the last few years, announced on Wednesday that it would shed its loan-guarantee affiliates.

Officials at the $1-billion organization said the move would allow it to further focus on its new mission of ensuring that college leads to meaningful results for students, which it does by making grants and investments in for-profit and nonprofit companies and organizations.

Over the last three years, the nonprofit USA Funds has raised its grant making from $10 million to $25 million annually, and has spent tens of millions more on investments in ventures like Road Trip Nation and Education at Work, and through a contract, a major polling effort by Gallup on attitudes about higher education.

“The guarantor role doesn’t really fit where we’re headed,” said Robert Murray, a spokesman for USA Funds.

The organization’s ties to the student-loan business have prompted some groups to shy away from its philanthropy. USA Funds remains proud of its work as a guarantor, Mr. Murray said, but the shift will help it cement its new “completion with a purpose” mission in the eyes of the public. ”I hope in the future people will quit referring to us as a guarantor,” he added. “I hope people will refer to us as a nonprofit college- and career-success organization.”

USA Funds still owns a company that provides loan-default services to about 200 colleges and universities. Its role as a guarantor has been shrinking since 2010, when Congress and the Obama administration eliminated the role of banks in originating federal student loans, a shift that also canceled the need for guarantee agencies. Although some have speculated that a Trump administration might seek to revive the role of private banks in student loans, Mr. Murray said it was unlikely there would be “a resurrection” of the old system.

The two loan-guarantee affiliates, United States Aid Funds and the Northwest Education Loan Association, will be transferred to another organization, the Great Lakes Higher Education Corporation, effective January 1. The two affiliates together guarantee a loan portfolio of about $50 billion.

In return for the transfer, Great Lakes will provide USA Funds with annual grants. The amounts of the grants were not disclosed, but Mr. Murray said they would be tied to the performance of the transferred loan portfolios.