HARTFORD, Conn. – More than a dozen credit unions have agreed to participate in a new program that will provide up to $17.5 million in low-rate student loans.
Under the program designed by Gov. Jodi Rell credit unions would offer rates no higher than 6%. Loans with deferred interest payments would carry the 6% rate, while those without deferred interest would have a 5.75% rate. The state’s education agency, the Connecticut Health and Education Facilities Authority would guarantee 20% of the loans.
The credit union initiative comes as the credit crunch has reduced the availability of student loans in Connecticut and around the country.
Connecticut’s credit unions, unlike those in other states, have been relatively unharmed by the financial crisis, which Gov. Rell noted in announcing the new program.
Connecticut is the third state where credit unions have helped rescue student loan programs in recent months. Last month eight Illinois credit unions agreed to make $100 million in low-cost loans available for college students, and in August North Carolina State Employees CU agreed to provide $1.1 billion in funding to the state’s student loan agency.
"Household budgets are already strained by the effects of our struggling national economy," said Gov. Rell. "Many families have seen the funds they set aside for college evaporate – and they are now hard-pressed to come up with tuition for their children."
"These loans will be made to students who may not qualify for traditional loans or who may have already used up all their resources and are now having trouble paying for college costs," the Governor said. "This program will be another financial resource for our families and it will serve important needs that in many cases are currently unmet by existing loan programs."
Under the program, the credit unions agreed to provide loans to new and current students of all ages who live or go to school in Connecticut. The funds will not be pooled and the individual credit unions will allocate their own funds. Credit unions must allocate a minimum of $100,000 of their funds to participate and the loan program will run for one-year with the possibility of extending that period, based on demand and available resources.
