Steering student loan borrowers in the direction of repayment

Help members prepare today for repayment tomorrow.

November 15, 2021

The fourth extension of the U.S. moratorium on federal student loan payments means credit union members continue to have options around repayment of debt.

Millions of credit union members took the opportunity to pause repayment at some point since the moratorium was instituted in March 2020. How prepared are those members to restart their payments come February 2022?

Leverage data to identify and help member borrowers

Credit unions can help members make the smartest decisions for their individual circumstances by taking a highly personalized approach. Not every member will need a financial product to see them through the transition. Some may just need a bit of coaching around spending, budgeting, or financial planning. Others may need a higher level of insight with information about avoiding delinquency, accrual of large interest, and damaged credit scores.

Using data from within their own systems, credit union teams can identify members most likely to welcome the support. Additional data sets can inform strategies for directing different support to different circumstances.

Naturally, credit unions with their own student loan programs will have rich levels of insight into members’ pandemic-era behaviors. They will be in a terrific position to reach out proactively to members who paused payments to help them plan for the spring of 2022. However, credit unions without formalized programs still can formulate strategies to assist student loan borrowers within their memberships simply by looking at ACH files.

Use ACH files to find members who paused repayment

Within ACH data, perform a basic inquiry search for the top student loan companies. This will produce a list of members who have student loan debt. That list can be narrowed to show members who paused repayment during the pandemic. It can even show those who initially paused  but have since restarted ahead of the moratorium expiration. (Perhaps a kudos or reward could be sent their way to show the credit union is paying attention and applauding their financial tenacity.)

To achieve a richer level of segmentation for greater personalized outreach, perform average balance trending or cash-flow and direct-deposit analysis. This will reveal members who are experiencing:

  1. Paused student loan payments.
  2. Lost income during the pandemic.
  3. Recent decreases in cash flow.
  4. New expenses or debts threatening overall financial health.

Once the list of borrowers has been built and segmented, credit unions can offer the right assistance to the right members at the right time. Whether that is budgeting support or student loan refinance products, the idea is to put the offer in a personalized framework.

Even as economy improves, members still may struggle

Senate and House Education Committee heads put it best in a June 2021 letter: “More than nine million Americans remain out of work, and the economic and health disparities created by the pandemic are severe.”

As more fintech disruptors and big tech brands enter consumers’ financial services decision sets, opportunities like loan repayment coaching and assistance will help credit unions continue to prove their difference. Credit unions that proactively find and help people who need it most will inspire loyalty and engagement and demonstrate the credit union mission of people helping people.

EMILY ENGSTROM is director of customer success at AdvantEdge Digital.