Class Is Back In Session For Student Loan Payments

Credit unions are gearing up for a big shift as interest on federal student loans resumes on Sept. 1, 2023, and payments become due starting in October 2023, following a three-year pause brought on by the pandemic and later extended due to inflation and economic uncertainty.

Although the so-called “payment pause” never applied to private student loan repayment, some consumers might have delayed consolidating their higher education debt as a result. Now, borrowers will soon have to make room in their budget to accommodate student loan payments again, which could pose an opportunity for credit unions to step in with assistance.

Relief And Flexibility

UMassFive College Federal Credit Union ($653.7M, Hadley, MA) has a robust student lending program that includes affordable undergraduate, graduate, and refinance solutions. Now, the cooperative also is offering members no payments and no interest for three months as well as a $250 cash back incentive for borrowers who refinance their student loans by Sept. 30, 2023.

“We’re all feeling the pressure on our wallets due to inflation and higher interest rates right now,” says Craig Boivin, vice president of marketing for UMassFive College Federal Credit Union. “This special offer provides relief up front to our members and allows flexibility, which is especially appealing as payments resume.”

According to Boivin, the credit union began offering cash back on student loan refinances to remain competitive with online lenders. The cooperative also recognizes that members who haven’t made a student loan payment since 2020 will have to shift their financial behaviors, especially if they’ve reallocated the money they would have spent on loan payments to something else.

“It’s important to let members know refinancing is an option for them,” the VP says. “Our overall goal is for members to pick up the phone and talk to us or a student lending counselor at our partner, Student Choice, before that first payment comes due.”

Why Student Loans?

For a credit union that initially formed to serve the staff and students of the five colleges located in the Pioneer Valley, student lending was a “no brainer,” Boivin says. After all, many of UMassFive’s members are attending college as undergraduates or considering continuing their education with graduate school. However, he also says all fields of membership could benefit from such an offering.

“Every credit union has families thinking about college financing,” Boivin says. “Helping young adults get on a better path supports the credit union mission of education as a whole and creates better educated financial consumers.”

As college costs continue to rise, credit unions have an opportunity to offer the guidance and support needed for families whose students aren’t getting a full ride or have funding gaps after exhausting scholarships and federal aid, Boivin says.

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Results And Advice

UMassFive has extended its special refinance offers several times, especially the three-months no payments or interest promotion.

“We offer this type of incentive for other types of loans too, so it fits well with our overall lending program,” Boivin says.

However, timing is everything, and Boivin expects to see refi volumes ramp up as the federal payment pause ends.

And although niche products — such as student lending — might require outside expertise, UMassFive says it’s important credit unions educate staff members about all its offerings.

“We view Student Choice as an extension of our credit union, so we market the program the same we would our internal loan products,” Boivin says. “Our staff can answer questions or introduce members to a college access counselor. We also offer educational workshops on college financing to help promote the program.”

In addition to undergraduate student lending, UMassFive has implemented other resourceful solutions to serve community needs. For example, three of its branches are in hospitals where medical refinance can make a big impact.

“We’re always thinking about groups and gaps for which we can deliver products,” Boivin says.

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