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NORTHSTAR GUARANTEE REDUCES GUARANTEE FEE ON LOANS FOR MINNESOTA STUDENTS

 ST. PAUL, Minn., July 19 /PRNewswire/ -- Northstar Guarantee Inc., the nonprofit agency that provides loan guarantees for Minnesota students under the Federal Family Educational Loan Program (FFELP), has lowered the guarantee fee charged to student borrowers to 1.0 percent for all types of educational institutions and degree programs. Prevailing guarantee fees vary with the type of institution attended and degree sought and range from 2.25 percent for four-year institutions to 3.0 percent for two-year and proprietary institutions (such as for- profit trade and technical schools).
 The guarantee rate reduction for Minnesota students takes effect for all loans with loan periods beginning on or after Aug. 15, 1993. "In the aggregate, this rate reduction will save Minnesota student borrowers an estimated $4 million in guarantee fees in the 1993-94 academic year, based on the volume of loan funds we're preparing to disburse," said Taige Thornton, Northstar Guarantee's president and chief executive officer.
 Thornton said that on a typical loan of $3,000 to a student attending a four-year institution, the lower guarantee rate will reduce the guarantee fee from $67.50 to $30.
 "We're able to reduce our guarantee fees because of Northstar's strong financial position and exceptional operating efficiency," said Thornton. "In this period of uncertainty about the future of the education finance system, we're pleased to be able to share the benefits of our efficiency and financial strength with our customers."
 Thornton said the rate reduction anticipates pending changes in the education finance system under consideration in Congress. "It's likely that under the direct lending initiative being considered in Congress, a reduction in guarantee rates will be mandated. But we see no need to wait for new regulations to introduce the lower rate since we're able to pass this savings on to our customers now."
 The Clinton Administration has proposed a new education finance system that would supplant banks as lenders in favor of direct government lending to students. Such a direct lending system would gradually eliminate the need for the regulatory assurance and loan guarantee services Northstar Guarantee provides.
 Earlier this year, in anticipation of implementation of some form of direct lending, Northstar Guarantee's board of directors authorized Northstar's management to establish a separate for-profit company, the Fountainhead Group. The Fountainhead Group continues to provide loan application processing, loan disbursement, loan collection and loan guarantee services as outsourcing agent for Northstar. In addition, as a separate for-profit entity, Fountainhead Group is able to pursue other opportunities in education finance and related fields that Northstar would be unable to pursue because of its nonprofit charter.
 "Forming the Fountainhead Group was the best way to guarantee a continued high level of service to our customers during this transition period in the education finance system while also providing us with the operating flexibility to pursue new opportunities in a changing marketplace," said Thornton.
 The Fountainhead Group was officially formed on June 1, 1993.
 -0- 7/19/93
 /CONTACT: Taige Thornton or Thom Dasher, 612-290-8780, both of Northstar Guarantee/


CO: Northstar Guarantee Inc. ST: Minnesota IN: FIN SU:

DB -- MN011 -- 2994 07/19/93 10:59 EDT
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Publication:PR Newswire
Date:Jul 19, 1993
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