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Is Now The Right Time To Offer Student Loans? Members Say ‘Yes.’

How credit unions can meet the unique funding needs of today’s college students and families.
Jillian Gajtka, VP, Sales & Client Services, CU Student Choice

There has been a constant maelstrom of media headlines the past several years related to federal student loan forgiveness, pandemic-induced college enrollment drops, and even the value of higher education. Mix in tightening liquidity for credit unions and it’s understandable some might wonder if now is the right time to offer student loans. But like most everything in today’s world, the real answer lies beyond the headlines.

Launched just before the onset of the Great Recession in 2008, Student Choice has helped nearly 300 credit unions enter the student lending business in the past 15 years, shepherding these programs and borrowers through multiple economic cycles. Through it all, one thing remains clear — assisting members with their higher education dreams is one of the most powerful investments a credit union will make, one that leads to better lives, stronger communities, and valuable new member relationships.

Although it’s impossible to predict the next political or economic cycle, it’s clear on a variety of fronts that 2024 is a great time for credit unions to add student lending to their product mix.

Why Now Is The Time For Credit Unions To Act

  1. Degrees remain in high demand. Despite some of the headline noise, college is still a worthy investment. According to Georgetown University Center on Education and the Workforce’s latest report, approximately 72% of jobs will require postsecondary education and training in 2031; 42% will require a bachelor’s degree or higher. Healthcare services, projected to be the fastest-growing career sector, will have 1.4 million annual job openings for workers with a bachelor’s degree or higher. Helping members get their degrees, and the higher-paying jobs that require them, is good business for all of us.

 

  1. Members need help paying for college now more than ever. Inflation isn’t just felt at the grocery store. According to U.S. News, the average sticker price at a private college for the 2023-2024 school year was $42,162. This at a time when families are also facing increases in everything from gas prices to utility bills. Private student loan options from trusted lenders like credit unions can provide the funding needed to help pay for college once students exhaust other forms of financial aid.

 

  1. The great FAFSA dilemma. The 2024-2025 Free Application for Federal Student Aid (FAFSA) underwent a number of changes aimed at streamlining the form and providing greater opportunities for some students to receive aid. However, a string of delays from the Department of Education could mean college students will not receive their financial aid award offers until sometime in May — when most students typically have already made decisions about which school they’ll attend.

 

Credit unions can provide greater flexibility in their funding options than other traditional lenders. The private student line of credit from Student Choice allows students and families to establish their line at any time — even if they’re unsure of the final amount needed or the school they’ll be attending — and then return later to request the exact amount they need. This type of flexibility and convenience is critically important to families waiting in limbo.

 

  1. Emerging opportunities in non-traditional education. Historically, private student lending options have focused on traditional four-year, non-profit institutions. Now, with an increasing demand for employees in high-paying skilled trades, new financing solutions for additional career pathways are being introduced by forward-thinking credit unions. Several have begun providing funding options for in-demand vocations such as nursing, aviation, aviation maintenance, and energy trades.The need for vocational training is clear and pressing. There’s an anticipated peak shortfall of approximately 24,000 pilots in 2026, a projected shortage of 43,000 aircraft mechanics by 2027, and more than 500,000 nurses needed to replace those leaving the profession, according to Oliver Wyman analysis and the Bureau of Labor Statistics. Credit unions should be part of the solution and likely already have some of these training programs in their own backyards.

 

  1. Long-term rewards. The value of these loans to members is clear. But what about the value to credit unions who offer private student loan solutions to their members? When working with an experienced partner like Student Choice, credit unions benefit from loans with stable, long-term performance due to prudent underwriting. On average, credit unions have been able to recognize a very sustainable return of approximately 2.25%. And with an average repayment duration of 10 years, these loans deliver strong value over an extended period of time and will yield even more value if/when rates drop in future years.

 

In addition, young adults who seek a private loan solution from a credit union will continue to use the credit union for other products. A Filene Study found that, in the 31 to 37 age group, those with private student loans took out a mortgage with their credit union at almost twice the rate of those without private student loans through their credit union. Engaging younger members now can reap lifelong benefits.

It’s Time To Meet Your Members’ Needs

Now is the time to take a fresh look at members’ needs for financing their higher education. Are you meeting current and potential members’ needs? Do members know to come to your credit union first for such financing? Awareness, especially in the highly seasonal private student lending market, is critical and can help your members and your credit union build more sustainable futures.

Remember, your credit union doesn’t have to go it alone. Partnering with an organization like CU Student Choice can simplify the process and responsibly put your cooperative directly in the business of private student lending, with zero FTEs needed, by leveraging nearly 16 years of expertise.

Contact us to learn more about offering customized student lending solutions.

 

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
February 19, 2024

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