Multiple delays in the 2024-25 Free Application for Federal Student Aid (FAFSA) process has caused a nightmarish scenario for many members with college-age children, but credit unions have an opportunity to serve these members’ most pressing financial needs.
Ask any member with teens and it will quickly become clear that cooperatives need to be helping families navigate the confusing and stressful college planning process. Most importantly, they can offer a loan solution that helps them bridge the financial gap that often remains after family savings, scholarships, and federal student loans have been exhausted. As we know, credit unions put members first and can often provide greater flexibility in their funding options.
Here are three specific trends happening now that credit unions can, and should, address:
1. Uncertainty about what families will need to pay for college. FAFSA delays have had a domino effect on many of the key milestones in the college selection process this year. Typically students and families would have more time and clarity regarding the federal financial aid they qualify for and use that information to carefully evaluate their options. However, students and families are in the midst of an incredibly stressful time crunch this year with some not knowing exactly how much they’ll need to pay for their chosen school.
Flexible funding solutions, such as CU Student Choice’s private education line of credit, allow students and families to establish their line at any time — even if they’re unsure of their final amount need or the school they’ll be attending — and then return later to complete the process. This flexibility is unique and could prove critically important to families this academic year to help fast-track their approval process during a tight timeline.
2. Higher federal student loan rates impacting parent and graduate school loans. With federal student loan rates tied to the 10-year U.S. Treasury note yield, traditional options such as PLUS and Grad PLUS loans are likely to become even more expensive this year.
According to studentaid.gov, the interest rate on Direct PLUS loans first disbursed on or after July 1, 2023, and before July 1, 2024, is 8.05%. Rates for the upcoming award year are announced each spring. Additionally, there is a loan fee on all Direct PLUS loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement. The current percentage for Direct PLUS loans is 4.228%.
Credit unions have a chance to meet their members’ financing needs and potentially save them significant money by offering extremely competitive rates with no origination fees.
3. Emergence and continued growth in career education. With an increasing demand for employees in high-paying skilled trades, more members might be choosing to pursue career pathways such as aviation, nursing, and energy trades. However, these critical career paths often are not eligible for traditional lending options, including federal student aid. This leads to a funding gap that credit unions are in a unique position to fill.
Credit unions have already begun stepping up to offer private student lending solutions for not only traditional college students but also those who choose a path that leads more directly to the workforce. By providing the affordable options members need today, your institution can open new doors to high-paying, in-demand jobs, building lifetime relationships and boosting the local economy.
For Utilities Employees Credit Union ($1.3B, Wyomissing, PA), the decision was simple.
“We saw a need from our utility-based SEG groups,” says Julie Ward, vice president of lending. “Most of the energy trade schools we’ve now partnered with do not have any other funding options. Our vision statement is to be our members’ trusted financial partner for life, and these members can also get other financial products from the credit union, including auto loans or their first credit card.”
CU Student Choice helps credit unions meet the evolving needs of the next generation of members. Our vision began with an education line of credit in 2008 and now has grown to include student loan refinance, skilled trades lending solutions, referral programs, next gen lead gen, and a dynamic loan origination system that simplifies the education lending process.
Contact us to learn more about how your credit union can partner with Student Choice to provide funding solutions to serve the needs of undergraduate students, parents, graduate students, and those pursuing new career education pathways. There’s no more important time than now to support local families and build new community partnerships.
Mike Weber is the chief marketing officer at CU Student Choice.
