Guaranty agencies are state or private nonprofit agencies that administer loans made under the Federal Family Education Loan (FFEL) program. The agencies insure federal student loans against default and pay off lenders when borrowers default. They also try to collect from borrowers.
While the FFEL program was eliminated in favor of the Direct Loan program in 2010, guaranty agencies are still responsible for servicing and collecting on existing FFEL loans. Many also now have contracts to service Direct Loans.