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The True Value Of A College Degree For Members — And Credit Unions

A student loan can be one of the most life-empowering loans a credit union can ever make. But in an era of rising debt and negativity surrounding the product, can private education lending create win-win situations for both borrowers and lenders?

Ask a recent college graduate if earning their degree was worth it and the answer may surprise you. According to a recent Bloomberg article, many college graduates are pessimistic about the return on their investment in a degree. This pessimism likely stems from the growing costs of college and ensuing student loan debt, but as the article clearly points out, for most college grads it’s unfounded. Time and time again, data show that earning a college degree is very well worth it, and that graduates will see the benefit of a degree over time.

Here are the facts:

  • The average income level of someone at least 25 years old with a bachelor’s degree is on average $30,264 more than the salary of a high school graduate, according to the Bureau of Labor Statistics.
  • The unemployment rate is significantly lower for those with a bachelor’s degree versus a high school diploma (3.8% vs. 12.2%, respectively), according to the Pew Research Center.
  • Over the past four decades, those with a bachelor’s degree have tended to earn 56% more than high school graduates, and those with an associate’s degree have tended to earn 21% more than high school graduates, according to the Federal Reserve Bank of New York. Looking at cumulative earnings over the entire career, the typical bachelor’s degree holder earns $1.19 million, twice what the typical high school graduate earns, and $335,000 more than what the typical associate degree graduate earns, according to The Hamilton Project.
  • A Pew Research study also found that on some key measures, the largest and most striking disparities between college graduates and those with less education surface in the millennial generation. Millennials with at least a bachelor’s degree earn $17,500 annually more than millennials with a high school education, a wage gap that is significantly larger than years prior and continuing to grow.

As strong as they may be, these facts don’t mean every college graduate will reach their maximum earning potential the moment they have their diploma in hand. These numbers reflect an average over time, and entry-level positions are just that an entry into the working world and a chance to use the knowledge gained in college to advance a career.

In fact, employed millennial college graduates are more likely than their peers with a high school diploma or less education to say their job is a stepping stone to a more desired position that furthers their career (86% vs. 57%). In contrast, millennials with a high school diploma or less are about three times as likely as college graduates to say their work is just a job to get by (42% vs. 14%).

The Impact On Student Lending

These facts are important for lenders to remember as they help families sort options for funding a valuable college education. The cost of tuition can seem staggering to most, as many Americans will experience their higher education venture as the biggest investment they may make with the exception of their home mortgage. It’s daunting, no doubt.

In fact, more U.S. parents worry about having enough money to pay for their children’s college education than other Americans worry about any other common financial concerns. According to a just released poll from Gallup, 73% of parents of children younger than 18 worry about funding college.

When families turn to their financial institution to help them through major life events, they are seeking experts who can answer their questions and put their minds at ease. Credit unions can play an incredibly important role in helping students and families understand how to responsibly fund their education.

Credit Union Student Choiceand its hundreds of partner credit unions offer a robust financial wellness platform that helps students and their families make effective personal finance, student loan, and career decisions. This platform an online portal featuring financial literacy tools for college students and recent graduates helps before, during, and after the college years, providing resources and information on schools, career paths, budgeting, workplace expectations and even an interactive job bank to help graduates find employment in cities across the country.

A key piece of the platform is an interactive module that prospective borrowers may complete before a loan application is submitted which ensures that students and parents understand college and loan costs as well as career salary expectations. A second module is also being deployed to help borrowers effectively enter their loan-repayment cycles.

Educating borrowers about the value of obtaining the different types of college degrees is also crucial so they understand the impact of the investment they’re making. Increasing negativity revolving around student lending issues can overshadow the true benefit of the education itself. Providing this type of straight-forward advice further positions credit unions as a trusted resource for any financial decision. And providing a student with valuable advice, and possibly a college loan to boot, sets up the credit union with an active member for all of life’s major decisions following graduation.

Building Future Relationships

By offering this sound advice and gaining the trust of their members, credit unions have an opportunity to build lasting relationships with a younger demographic. Students leaving home for the first time may also need a checking account or their first credit card. New graduates could be looking for a car loan. For one Student Choice client credit union that has offered the program for five years, a review of their borrowers in repayment showed that:

  • 63% had a checking account
  • 22% had a credit card
  • 16% had an auto loan

Providing a private student loan option for families isn’t just about paying for college; it’s also about building a solid foundation for a strong financial future. It’s not only an investment in education for the student’s future career and success but an investment for the credit union and the local communities in which members live again, positioning the institution as a trusted resource to provide further services through life’s financial milestones.

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.
April 27, 2015

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