Funding Job Training With A Twist

As the only community development financial institution (CDFI) on the 120-mile stretch of Lake Erie shoreline from Toledo to Cleveland, Commodore Perry Federal Credit Union ($45.3M, Oak Harbor, OH) feels a particular tug toward addressing the economic barriers faced by its rural and small-town membership.

That’s one inspiration behind the unique offering the cooperative just rolled out: a mix-and-match package of four loans aimed at enabling Ottawa County residents to pay for the training and certifications they need to get good-paying jobs. The package comprises a debt consolidation loan, an auto refinancing loan, a technical skills education loan, and perhaps the most unusual offering, a wage replacement loan. That loan will be disbursed as a paycheck and the payments deferred while the borrower is enrolled in a training program.

The program — dubbed Career Connection Ottawa County — has just launched and one loan has been made so far: a technical skills education loan to a member training to be a truck driver.

“His prospects are great,” says Mike Barr, Commodore Perry FCU president and CEO. “The cost of the training is about $4,000 and he can easily make $55,000 a year.”

CPFCU is using an $875,000 CDFI grant to provide the capital and loan reserves needed to support the four-pronged program, which in turn will provide economic opportunity to borrowers and economic development to a local economy that can use the help.

Ottawa County has approximately 41,000 people and is heavily dependent on the tourism business centered on its Lake Erie coast and islands. Barr says the county’s unemployment rate typically runs about twice the national average and in the winter spikes up to 17%. Two-thirds of its residents don’t have college degrees.

But opportunity is there. Technical and trade skills are in demand, but the cost of the programs ― in terms of both time and money ― put them out of reach for many. Traditional student loans and grants typically don’t cover trade certification programs, leaving little choice but credit cards or other high-interest alternatives for those who can afford to take the time away from work to attend.

“We’re talking about working adults, many with families, who typically don’t have a few thousand dollars available to take a welding or truck driving class,” says Barr, a native of Ottawa County who joined CPFCU in 2003 and took the helm in 2008. “We came up with a program that mirrors the unique benefits of traditional student loans, with some twists of its own.”

The four types of loans that Commodore Perry FCU is offering in partnership with Career Connection Ottawa County include a debt consolidation loan, an auto refinancing loan, a technical skills education loan, and a wage replacement loan.

Barr and his team crafted the loan package after discussions with local economic development organizations and technical schools, including the Ottawa County Community Improvement Corporation, EHOVE Career Center and Terra State Community College.

“We asked them if you have someone who wants to be in your program but doesn’t have the money available, how do you suggest they finance it?” Barr says. “And what other impediments do they face?”

His research also included searching Google, just as a potential borrower would, and he found the choices limited to high-interest loans from various sources, but none from credit unions.

“I thought that was a little sad,” he says.

Affordable transportation and managing bills are fairly universal fundamentals addressed in the refinancing and loan consolidation pieces of the four-loan package. The technical education loan addressed the third piece: making the training affordable.

But what about people who would like to get some training but can’t take 10 or 20 hours off work? For the many Ottawa Countians, that loss of income could be the ultimate financial barrier.

“To address that, we’ll look at how large the reduction in wages would be and how often they get paid, then finance that aggregate amount and disburse it at the same frequency as their current pay period,” Barr says.

No two situations are alike, and the program’s mix-and-match flexibility empowers CPFCU’s lenders to customize a solution that gives the member an opportunity that otherwise could be out of reach.

“It’s a holistic approach that’s really a tool chest for our team to put together a package to address whatever financial barriers there are to get people into these programs and on to higher paying jobs,” Barr says.

In the process, CPFCU will be building on a record of service that has seen the credit union notch a score of 92.20 out of 100 in Callahan’s Return of the Member (ROM) index that measures the value a cooperative returns to its member-owners.

CPFCU is marketing the Career Connection Ottawa County loan program in much the same way it created the program in the first place, in partnership with local schools and economic development groups. There also will be in-branch and community promotions.

As for managing the loans, beyond traditional underwriting and reserving for risk, the cooperative won’t follow the borrowers’ educational progress beyond requiring the training programs be certified and checking to see if the borrower indeed completed them.

“After that, we’ll check in to see what type of jobs they’re in, how much their wages have improved, and what kind of positive impact we’ve been able to make on people’s lives,” Barr says. “Because, ultimately, that’s what we’re here for.”

CPFCU was certified as a CDFI several years ago and the $875,000 grant that arrived in March is its first. But it might not be its last.

“We’re going to look at ways to address housing costs, particularly the rent burden for low-income families,” Barr says. “Maybe we can find a way to offer a unique way to get people into home ownership without necessarily having a lot of money to put down.”