A positive trend in the United States is the increasing number of college-bound students. According to the Bureau for Labor Statistics, over 68 percent of the Class of 2005 high school graduates are enrolled in colleges or universities. This was the highest post-secondary enrollment rate since 1959.
Growing Market, Greedy Vendors
While these enrollment rates are heralded as a success for society, this growth comes at a cost. Increasing college tuitions have led to the rapid growth of the student loan market. Lenders have stepped in to meet this demand, but unfortunately many of them are doing so in a way which focuses on high revenues and pleasing shareholders, rather than helping students achieve their educational goals.
The impact of student loan debt and the fortunes made off this market are rapidly gaining national media exposure. Numerous newspaper articles, websites and books are now dedicated to this topic.
According to one website created to put a spotlight on lenders making millions off indebted students, “since 1997, student loans have become the most profitable, oppressive, and predatory type of debt of any in the nation.” One contributor wrote that,
“the rates charged through the years have buried me alive.”
Credit Unions to the Rescue – A Perfect Fit for the Credit Union Mission
The reason these organizations receive such negative press is precisely what makes credit unions unique from their competitors. Credit unions pride themselves on providing products and services that enrich the lives of members. Student loans represent an opportunity for credit unions to fulfill their mission by providing a needed loan alternative that focuses on the members’ needs.
Several credit unions are already actively engaged in student lending. ELR, a CUSO owned by USC FCU, was recently spotlighted in a Business Week article for their borrower-friendly lending program. The article commended ELR for rebating students half of the 3 percent origination fee on their loan.
Both Parties Benefit
Establishing a student loan program will not only benefit the member but also the credit union. The member will receive a more favorable product from an institution that focuses on their needs rather than boosting the institution’s revenue. With such high loan growth the past years, these student loans will help credit unions sustain loan growth in the face of a potential housing bubble and rising interest rates. In addition, student loans are a very effective way for credit unions to connect with young members and cross-sell other products and services.
To learn more about student loans and how they can benefit your credit union, please join us for our webinar, Private Student Loans: Growing Balances and Attracting Gen Y