While no one knows exactly what impact the new Presidential administration will have on student lending, borrowers in repayment should start preparing now for the possibility of fewer federal student loan forgiveness options and significantly higher monthly payments.
According to a recent Forbes article, “Millions of borrowers may see big increases to their monthly student loan payments . . . as several key Biden administration initiatives are imperiled or will expire in 2025.” This includes programs aimed at providing federal student loan forgiveness, including the Biden administration’s 2023 SAVE plan that is tied up in legal challenges.
How can credit unions help?
With the Federal Reserve cutting rates by a total of 1.00% in 2024, there is an opportunity for credit unions to save members money by helping them refinance their existing student loans. College graduates with federal and private student loan balances to repay may choose to consolidate both into a single monthly payment.
Offering student loan refinance could be especially helpful for members who may unexpectedly see their payments skyrocket due to federal programs ending this year. Rather than losing borrowers to online lenders as interest in refinancing grows, credit unions have an opportunity to capture these refinances and help their members enjoy significant savings.
What is the relationship potential?
For all the college graduates who have been diligently making their monthly payments and slowly chipping away at their student loan debt, assistance from their credit union could open the door to a profitable relationship today and a lifetime of additional lending opportunities.
In fact, based on CU Student Choice’s analysis of 13 years’ worth of Student Choice borrower data from TransUnion, 81% of borrowers took out an auto loan; 60% took out a credit card; and 48% took out a mortgage after taking out a student loan with a credit union. Naturally, we think credit unions should have the opportunity to provide all these loans.
What else should my cooperative consider?
In addition to refinancing, current students and their families still have pressing college financing needs this year. While there is a so-called “mini-peak” season of applications each January as students head back for the spring term, the vast majority of student loan applications come in the late spring/early summer months of May, June and July.
If you don’t already have a student lending program in place, or if you haven’t been actively promoting yours, now is the time to ensure your credit union is prepared to offer affordable solutions for existing members and their families. Paying for college is a critical point on the financial journey of many parents and young adults and your credit union’s timing is everything.
Private student lending solutions help ensure that funding gaps that remain after savings, scholarships and federal student aid are exhausted, can be met. In fact, a private student loan is often the first significant loan relationship an 18—22-year-old will establish. Shouldn’t your credit union be the one they turn to for this critical financing need?
Student Choice makes it easy to get started in the private student lending space and more fully live your cooperative mission in 2025 and beyond. Our private education line of credit requires a low lift for a high return, and our refinance solution allows members to simplify their student loan repayment. Contact us to learn more about how CU Student Choice can help you offer customized student lending solutions that benefit your current and future members before peak season hits this spring!
