Credit unions that aren’t already offering private student loans or student loan refinancing are missing a golden opportunity, according to panelists speaking Monday at the CUNA Lending Council Conference in Fort Lauderdale, Fla.
Total student loan debt reached $1.19 trillion this year, up from $370 billion in 2005. Reasons for the increase include the rising cost of an education, higher college attendance, and lengthier tracks toward achieving a degree—which in turn leads to longer repayment deferment periods, says Jim Holt, chief revenue officer for CU Student Choice.
While the cost of an education is going up, a degree still represents a “fantastic opportunity,” Holt said. To put that investment in perspective, Holt notes the average student loan debt is $31,252—less than the price of an average car—and 40% of debt holders owe less than $10,000.
Credit unions can assist members in their pursuit of a degree, by offering loans to pay for their education or refinancing existing student loan debt to save them money.
UW Credit Union, in Madison, Wis., began offering private student loans in 2005. In the past decade, the credit union issued more than $300 million in private student loans, with an average loan indebtedness of $24,000, says Mike Long, UW's chief credit officer.
Even if credit unions don’t offer loans to students currently in school, they can reach out to members who carry college debt with other financial institutions.
UW Credit Union launched a student loan refinancing program three years ago, according to Long. Members can refinance up to $60,000 for a 15-year period. The average borrower is a 31-year-old graduate who has a job.
“This is a huge opportunity that’s sitting in front of us,” Long says. “For the life of me, I don’t know why we haven’t jumped on this opportunity.”
A study by LendKey, a CUNA Strategic Services alliance provider, reveals $836 billion in student loan debt that “could be refinanced,” says Jason Hills, LendKey’s senior vice president of sales, account management.
Credit unions and borrowers alike could benefit from a student loan refinancing program, according to Hills. Borrowers would save money and credit unions would gain exposure to potential new members.