Credit unions are avoiding the apocalyptic view promulgated by today’s political rhetoric. No matter who wins the debate on Capitol Hill, it is credit union members who will lose in the event of a government shut down, so credit unions across the nation are taking action and offering solutions to keep members’ finances steady during this turbulent time. For example, the impasse over the federal budget could significantly impact the flow of educational funds to students, colleges, and universities. To address the possible shortage of funds, nearly 200 CU Student Choice credit unions — among them Wright-Patt Credit Union ($2.1B, Fairborn, OH), Suncoast Schools Federal Credit Union ($5.0B, Tampa, FL), and San Antonio Credit Union ($2.9B, San Antonio, TX) — have collectively pledged $1 billion to higher education financing solutions.
“Ongoing budget negotiations could result in delayed or reduced funding of educational programs,” says Jon Jeffreys, CEO of CU Student Choice. “Our credit union partners support students and families, and, in turn, the colleges and universities that are the bedrock of many communities.”
Although this pledge refers specifically to private student lending, any credit union can serve as a resource for members that might need a financial contingency plan if ongoing negotiations — at the federal, state, or municipal level — disrupt much-needed funds. Instead of dreading the worst case scenario, several credit unions are creating real solutions for real people to address the potential void in government resources.
Case in point: If federal paychecks are delayed, holders of approximately 57,000 accounts at Randolph-Brooks Federal Credit Union ($4.3B) are covered. The Texas-based credit union will assist its federal employee members by crediting accounts with a one-time repayable deposit equal to the member’s previous federal payroll deposit. When the federal paycheck arrives, the credit union will reconcile the account.
Elsewhere in Texas, Texas Dow Employees Credit Union ($1.7B, Lake Jackson, TX) wants to make sure its members can purchase groceries, pay bills, and cover necessary expenses. With this in mind, the credit union will offer members with existing federal deposits a special signature loan that features no interest for the first 30 days and funding equal to the amount of their deposit.
And back east, Justice Federal Credit Union ($508.7M, Chantilly, VA) announced last week the launch of its Furlough Relief loan, which is aimed at its federal employee members. The loan features a 0% interest rate for 60 days (the interest rate then converts to 4.90%) with funding of up to $3,000 (based on net pay and direct deposit) on a 12-month repayment schedule. In addition to the loan, members affected by a disruption in federal funding can also defer payments on consumer loans or credit cards they carry with Justice.
Contingency planning is a prudent business strategy in any environment. When times are tough, back-up plans give members a way to take care of themselves. They also are one of the myriad ways credit unions fulfill their public policy role. A critical part of the economic recovery relies on the continuing efforts of credit unions nationwide to fill the credit void. This comes in the form of student assistance, honored paychecks, and debt repayment relief. Credit unions are already undertaking these initiatives and more.