According to a recent Gallup Poll, paying for college is the top money concern for parents of children younger than 18 years old. In fact, more than seven in 10 parents indicated they were “very” or “moderately” worried about the issue. Simply stated, this means that parents worry more about having enough money to pay for their children's college education than other Americans worry about any other common financial concern, even more than retirement or medical costs.
With the cost of college exploding over the past 30 years, these poll results should come as no surprise. And with fall semester just weeks away, you can rest assured that millions of parents — and college-bound young adults — are staring this challenge squarely in the eye.
In addition to buying a home and saving for retirement, funding a higher education is one of the three biggest financial decisions faced by the average consumer. For credit unions, helping students and families navigate this incredibly important — and complex — process is a huge opportunity. Over the past seven years, hundreds of credit unions have stepped into the fray by offering private student loans to students and consolidation loans to graduates, resulting in well over $3 billion in outstanding private student loans within the credit union space. While providing a fair-value private student lending option to members is critically important, it’s only part of the equation.
When families turn to their financial institution to help them through major life events (such as the 73% of parents in the Gallup Poll) they are seeking experts who can answer their questions and put their minds at ease. Helping students and families understand how to responsibly fund their education is mission-critical for credit unions engaged in the private student lending arena.
To address this mission, Credit Union Student Choice and its hundreds of partner credit unions are providing support across multiple channels. A robust online financial wellness platform 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 and workplace expectations. There’s 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.
With a Personal Touch
In addition, Student Choice representatives, in partnership with credit unions, have conducted hundreds of on-site member seminars over the past seven years. From credit union meeting rooms to high school auditoriums, these impactful seminars have exposed thousands of students and parents to straight-forward advice on how to prepare and pay for college while positioning credit unions as trusted experts.
Doubling down on this personal approach, a new College Access Counselor position at Student Choice will bring additional focus to borrower counseling and efficient deployment of educational resources—including national webinars and regional seminars—that will truly help members.
Forging Real Connections with Key Borrowers
Helping families navigate the confusing maze of how to best pay for college, while also offering a fair-value private student loan to those who need to fill educational funding gaps, is proving to be a very powerful connection source for many credit unions. According to research conducted on six credit unions that offer the Student Choice lending program, average checking account penetration for their Student Choice borrowers was nearly 56%, while more than 21% had a credit card. Another strong indicator was that more than 9% had an auto loan with the credit union. According to one lender, total deposit balances for their student loan borrowers was more than $4.6 million while total loan balances (outside of their student loans) were approximately $3.7 million.
While these additional loan relationships may fly in the face of recent conventional wisdom concerning student loan borrowers, they actually fit with the latest research from TransUnion. The 2015 TransUnion study – “Are Student Loans Really Hurting Consumers?” — shows there is not a negative change for student loan borrowers over time. “In fact, consumers ages 18-29 with a student loan in repayment generally are able to gain access to new loans and perform as well or better on those new loans as similarly aged consumers without student loans.” The study also found that in only three to six years, student-loan consumers in their 20s have been observed to pass similarly aged consumers without a student loan in overall loan participation rates on mortgages, auto loans, and credit cards.
The bottom line is that connecting with these college-educated young adults is critically important. By engaging with them (and their parents) early and often during one of the most important financial decisions they will ever make, credit unions have an excellent opportunity to build sustainable, long-term relationships ... during college, and beyond.