There Are No Scholarships for Retirement

“There are no scholarships for retirement.” That was one of the most thought-provoking pieces of advice I’ve read in the financial press in the past year. As parents become increasingly concerned about the price of higher education, they are forced to make difficult decisions about saving for their own retirement and saving for their children’s education.

 
 

"There are no scholarships for retirement." That was one of the most thought-provoking pieces of advice I’ve read in the financial press in the past year. As parents become increasingly concerned about the price of higher education, they are forced to make difficult decisions about saving for their own retirement and saving for their children’s education.

Clearly the writer was making a point about not seriously jeopardizing your own future on behalf of your children.  I am in no way advocating that members stop saving for their children or that parents should not help with tuition costs when possible, but the point is that few people truly understand the implications of their financial choices when it comes to education finance.  In fact, one university website I visited this weekend provided information for parents on how to tap their retirement savings to fund college this year!

And now, with asset prices declining—529 plans and 401(k) balances invested in the stock market are at their lowest point in years, home values have stagnated or are declining across the country and many families are facing the prospect of a parent losing their job—the decisions facing students heading off to college are difficult.  For parents it can be a major "fork in the road" decision, steeped in the emotion of wanting what is best for their child, but one that could have lasting financial consequences. 

So why am I writing about college financing now? Because your members are already thinking about it.  Early action (or early application) deadlines passed this weekend for many schools. The first letters of acceptance—and tuition costs—are going to be headed to your members within weeks. Are they ready? Are you?

In good economic times and in bad, serving the financial needs of the member is why credit unions exist. Today, the member need has perhaps never been greater in the area of education finance and in particular the need for private student loans. With all the news coverage of private student lenders pulling out of the market, parents may be unaware of the availability of affordable credit union private loan options.   

Growing at an annual rate between 20-35% in the last seven years, private student loans represent the fastest growing segment of the more than $200 billion annual education finance market.  These loans help with the most strategic need faced by students and families -- the funding "gap" that remains between the total cost of attendance and any federal aid and scholarships awarded. With tuition continuing to skyrocket, federal aid limits that haven’t even kept pace with inflation, declining home equity availability, and weakened economy, the role of private student loan financing in the present and future is clear. 

Now is the time to set the wheels in motion for your own Private Student Loan program.

Timeline

Members

Credit Union

November - December

Early application deadlines for college

Researching finance options (scholarships, grants, and loans)

Evaluate turn-key CUSO programs: loan portfolio* vs. referral program options

Make recommendation to the Board

Commit to program

January-April

Learn of scholarship
decisions

Apply for government financial aid (FAFSA form)

Research "gap" financing options including private student loans.

Set the value member will receive (rates)*

Launch CU-branded student lending website*

Develop marketing materials and messaging*

Train employees on the program*

Host student lending seminars (in concert with other financial topics for families)

May – August

 

Application season for Fall semester*

Continue to host seminars

September – Oct

 

Evaluate successes and new opportunities* with area schools



Sound like a lot? It can be. But it doesn’t have to be.  Turn-key private solutions can be a great way to enter the market quickly, as long as your credit union can retain control of the pricing and the loans to ensure your members are getting the best value available.  Digital Credit Union chose this option with the new CUSO Credit Union Student Choice (read about their program here.)

 

 

 

Nov. 3, 2008


Comments

 
 
 
  • Same old attempt to get readers to buy in on the high priced webinar thing. And what does the '*' at the end mean? No explanation there?
    William Usuk, Michigan