Washington, D.C. (August 18, 2008) - In stark contrast to the dreary newspaper articles chronicling the downfall of student lenders, including such big names as Bank of America and Wachovia, Credit Union Student Choice is finding success as a new entrant in the private student loan market. With the start of fall semester just weeks away, the new credit union service organization (CUSO) that launched in May announced they have now approved more than $25 million in private student loans for the upcoming academic year.
"We could not have picked a better time to help credit unions successfully enter the private student loan market," said Jon Jeffreys, President of Credit Union Student Choice. "We’ve enabled credit unions to fill the void for students and families during a time of critical need, as many banks and finance companies have been forced to leave the market. Credit unions are uniquely positioned to excel in private student loans, and we’re proving that point, as more than 1,500 students have already been approved for a low-rate, zero-fee CU Student Choice loan with their credit union this season."
Sixteen credit unions in 13 different states are currently offering loans through the services provided by the CUSO. The turnkey solution gives credit unions the ability to offer their own full-service private student loan program without adding any additional staff. Credit unions retain the full long-term economic benefit and important relationship opportunities that these loans offer.
According to Jeffreys, credit union’s balance-sheet lending capability puts them in a powerful position to gain local market share, form long-term relationships with young adults and schools, and provide a valuable financial service to their members at a time when many other lenders are struggling with unfavorable market conditions. "Most private student lenders rely on secondary market access to fund loans," said Jeffreys. "Due to the mortgage meltdown and ensuing credit crunch, that market has completely evaporated, forcing many lenders to stop funding new loans or significantly raise their fees and rates."
Jeffreys points out that credit unions are not subject to the same liquidity concerns and capital market fluctuations that many publically traded student lenders have experienced over the past year. "Using proper risk management and offering appropriate terms is what has allowed credit unions to successfully lend member deposits for many years. This balance-sheet lending is what credit unions do best and is a core competence that will continue to drive their long-term successful growth," said Jeffreys." Mix in our ‘people helping people’ philosophy and the fact that our loans have zero origination fees and rates well below market averages, and it becomes obvious that we’re providing superior economic value for borrowers and good business for credit unions."
In addition to the economic value of the loan itself, credit unions partnered with Student Choice are finding the loans to be a significant source of Gen-Y membership growth. Early results indicate that more than 80% of student applicants were not currently members of the credit union. While all were eligible for membership and many had immediate family who were credit union members, the loan provided the impetus to actually join the credit union. "Deciding how to pay for college is the biggest financial decision for a young adult," said Jeffreys. "Our credit unions are excited to now have a much-needed product for students that will allow them to begin building long-term productive relationship with these members who are the future of the credit union."
The sixteen credit unions now live on the Student Choice network (along with their asset size) include: Affinity Plus FCU ($1.4B), Alabama CU ($282M), Digital FCU ($4.1B), Directions CU ($518M), Eli Lilly FCU ($828M), Irving City Employees FCU ($36M), Leaders CU ($105M), Members 1st FCU ($1.5B), NASA FCU ($900M), Northwest FCU ($1.6B), NuUnion CU ($812M), San Antonio FCU ($2.5B), Star One CU ($3.8B), Visions FCU ($2.1B), Workers CU ($595M), and Wright-Patt CU ($1.4B).
As a result of the ever-increasing cost of college education, the private student loan market has grown dramatically in the past seven years, from $4.7 billion to $22.5 billion. "That growth curve is projected to continue in the coming years and credit unions, with their unique ability to collaborate, bring unique advantages to this market that other lenders cannot," said Jeffreys.
Credit Union Student Choice was founded by a group of the nation’s leading credit unions. Loan features include zero origination fees, significantly lower interest rates, in-school deferred payment, co-signer release, and a graduated repayment option. The unique product is structured as a line of credit, which allows students to make multiple draws over the course of their entire college career after completing just one simple application.
The networked structure of the CUSO enables credit unions to offer their own private student loan program without referring the economic and relationship values of these loans to 3rd parties. The program leverages best of breed partners to handle call center operations, automated credit decisioning, loan servicing and insurance, and fully co-branded websites for each participating credit union. Service partners include the Callahan Credit Union Financial Services Limited Partnership CUSO, Callahan & Associates, PSCU Financial Services, Digital Dialogue, L9.com, Credit Union Direct Lending (CUDL), CU*Answers, as well as experienced student loan servicers.
Credit Union Student Choice is a credit union service organization (CUSO) founded in 2008 by several of the nation’s leading credit unions and CUSOs. Credit Union Student Choice positions credit unions as leaders in education financing in the 21st century by redefining value for student borrowers and helping credit unions connect with new Gen Y members. The Credit Union Student Choice network enables credit unions of all asset sizes and fields of membership to make private student loans that may be held on their own balance sheet to recognize the long-term economic return of the loan relationship versus a one-time referral fee. The CUSO helps credit unions by managing many of the challenges and risks commonly associated with student lending. To learn more or find out how your credit union can participate, call 800-446-7453 and ask for a Credit Union Student Choice representative.
Posted 08/19/08 to www.NASFAA.org. Posting of press releases is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
