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Student Loan Repayment Assistance Now An Emerging New Opportunity

Credit unions can help their employees via targeted financial education and repayment assistance, and potentially strengthen SEG relationships, with new benefits tied to student loans.

Within the past two years, a handful of companies have emerged in the employee benefits space, helping large organizations develop and administer student loan repayment assistance plans for their employees. Considering the rise in student debt, and the challenge in attracting and retaining millennials, it’s not surprising that this type of benefits perk is becoming highly valued by young adults.

Based on a recent survey from ionTuition, a leading provider of student loan counseling and repayment services, more than 80% of this year’s respondents with college debt said they would like to work for a company that offers student loan repayment plans, compared to 70% in 2015. In fact, 49% percent of respondents said they would choose student loan assistance over a 401(k) plan, a 6% increase from 2015.

In addition to employee demand driving this benefit trend, companies and employees could also soon be getting a boost from Uncle Sam. Multiple bills have been introduced that would create tax benefits for employers for either making qualified student loan payments on employees’ behalf or reimbursing the employee for payments made, similar to the tax credits that exist now for employer tuition assistance. Additionally, the borrower would not have to pay taxes on the funds provided by the employer toward the student loan.

A New Opportunity For Credit Unions In Repayment Assistance

While a growing number of large organizations, including Fidelity, Aetna, and PricewaterhouseCoopers have announced student loan benefit plans recently, the trend is only starting to emerge in the credit union space. To help more credit unions offer repayment assistance benefits to employees, members, and potentially to SEGs as a white label solution, Credit Union Student Choice has launched CollegePAYE (Planning and Affording Your Education).

Offered in partnership with IonTuition, CollegePAYE is unique from other student loan benefit providers, as it combines intuitive online management tools with free, on-demand access to expert student loan counselors that are able to help young workers find repayment solutions that work best for them. Credit unions and SEGs may choose to simply offer CollegePAYE’s educational resource portal, including access to expert counselors and online dashboards, or elect to also make student loan contributions on behalf of employees.

Employees and their family members can utilize CollegePAYE to find the best repayment solutions available, whether their objective is to lower monthly payments or get out of debt as soon as possible, said Jim Holt, Student Choice’s chief development officer. The unique platform also helps families throughout the college planning lifecycle by providing ROI-based school selection tools through a mobile-first platform.

And Student Loan Refinance

According to Holt, CollegePAYE also gives credit unions the ability to integrate their own student loan refinance programs via customizable dashboards, an important marketing channel in the highly competitive student loan refinance market. Not surprisingly, other lenders are working hand in hand with repayment assistance firms to serve as a referral recipient for employees looking to refinance. In other cases, such as Sofi, lenders have even created their own programs combining repay assistance and refinance.

Taking a page from the historical playbook of credit unions, Sofi has funded more than $1 billion in student loan refinancing to borrowers through 400 corporate partners, ranging from Microsoft to membership organizations. According to a senior representative from the burgeoning online lender, this channel has been extremely cost-effective and opens the door to a coveted demographic in need of a full range of financial services.

Credit unions are turning to their own SEGs to find similar opportunities. BCU ($2.6B; Vernon Hills, IL) first began offering a student loan refinance product in 2013 before expanding the program in late 2016.

Student loan refinance is a very relevant product for millennials and a key benefit that we can promote to our SEGs, said David Brydun, BCU vice president of consumer lending. With our employer-focused business model and more companies focusing on ways to help employees manage and reduce their student loan debt, we think this is a great fit and another way for us to provide value to our key business partners.

BCU’s corporate relations and lending departments worked together to position the refi product as a desirable employee benefit and conducted meetings and informational webinars with key HR contacts to create awareness. The credit union also incorporated the loan into various financial well-being initiatives delivered to SEGs. According to Brydun, this effort and timing was critical, as the credit union had to fend off competition from fintech startups who were attempting to forge loan referral relationships with the credit union’s SEGs.

We’ve now worked with three different SEGs to roll out student loan refinance assistance to their employees and are excited about the opportunities ahead, not just with a lending product but for the chance to develop deeper long-term member relationships, said Brydun.

With the strong historical ties and deep relationships that many credit unions have with SEGs, student loan refinance and repayment assistance via a new benefit like CollegePAYE could be a significant opportunity in 2018 and beyond.

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 5, 2018

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