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By CU Student Choice
In the September 2014 NCUA Report, Chairman Debbie Matz reiterated her support of private student lending in an aptly named article, “Credit Unions Help Students Go Back to School”. Matz correctly points out that student lending is not only a “potentially promising” opportunity for credit unions to establish long-term relationships with young adults at an early stage in their financial lives, but also gives credit unions a chance to diversify loan portfolios.
Manage your student-loan portfolio well, and your investments in education will pay off in terms of future prosperity for your members and for your credit union.—Chairman Debbie Matz, September 2014 NCUA Report
As one would expect from the chief regulator, the chairman also shared best practices, giving credit unions a helpful road map for how to manage their student lending program. These practices align closely with many of the items outlined in the NCUA supervisory letter to credit unions (LCU2013-15) it released at the end of 2013 regarding private student lending. Check out the article below that originally ran on Feb. 10, 2014, to apprise yourself of the key takeaways:
Considering the strong growth in credit union private student lending (PSL) over the past five years — the asset class now totals more than $2 billion — it should come as no surprise that PSL is receiving the regulatory attention that credit unions are accustomed to seeing with other well-established lending programs, such as credit cards and auto loans.
The supervisory letter is certainly required reading for credit unions who are interested in, or are currently offering a private student lending program, as well as any third parties that assist credit unions in the origination, processing, and/or servicing of these loans. In a nutshell, the letter provides an overview and background on PSLs, defines field staff responsibilities, outlines risk management expectations, and provides a questionnaire to assist field staff in conducting examinations.
Although additional regulatory requirements can bring about new challenges, the NCUA directive should provide comfort to credit unions for two important reasons:
As you’d expect, the letter and accompanying questionnaire put forth detailed guidance to help field staff examine PSL programs and analyze associated risks. Credit unions and third-party service providers should take special note of three key takeaways:
For credit unions that are working with a third party to offer private student lending, it will be critical to work with that entity to procure the necessary reporting metrics.
Jim Holt is the chief revenue officer and senior vice president of Credit Union Student Choice.
This article originally ran on CreditUnions.com on Feb.10, 2014.
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October 20, 2014
2/20/2014 11:14 AM
Excellent article for those of us that might be considering the risks associated with student lending.
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