Responsible Approach Leads to Student Loan Success
Portfolio limits, consistent underwriting standards leads to healthy private student loan program.
Why don’t more credit unions offer private student loans? Fear of the unknown, says Mike Long, executive vice president/chief credit officer for $1.8 billion asset UW Credit Union, Madison, Wis.
“People generally fear what they don’t understand,” says Long. “There’s been so much misinformation about student lending in general—that it will be the next bubble to hit the country because of the amount of debt students are carrying.
“I don’t think many credit unions take the time to understand that a lot of the issues out there are related to government-guaranteed student loans, not private student loans,” he continues. “If credit unions would take the time to understand what opportunity they have in this space, more would be open to offering private student loans to members.”
Another deterrent is the lack of affiliation with a university. “Again, that’s a misinterpretation because all of us have adult members with college-age kids who are trying to find a way to finance their education,” Long says. “Members are going someplace to do this—it might as well be the credit union where they do all of their other business.”
The key to student lending success, like any product, is to do it responsibly, says Long, who oversees a $90 million student loan portfolio. “We decided not to have more than 10% of our total assets tied up in this product category. For us that means we wouldn’t hold more than $190 million of these loans. So we have plenty of room to grow the portfolio.
“If you do this responsibly and underwrite these loans like any other loan at your credit union, you’ll have a good shot at success.”