HOLLYWOOD, Fla. - CUNA Mutual CEO Jeff Post is among those who believe student lending holds great promise for credit unions.
“The most intriguing thing to me is student loans and the ability to bring in tons of new members,” he said.
CUNA Mutual Group is piloting a program with 40 credit unions that not only makes funds available to help credit unions underwrite student loans, it offers a 25-basis-point discount if the borrower signs up to become a member. It launched June 15 and Post said CUNA Mutual has capped the initial program at $100 million in loans.
Noting that 95% of the student loan market is Internet-based, Post said CUNA Mutual has partnered with North Star Bank, a top five student lender, in the effort.
“The first thing we ask when they come to this channel is ‘Are you a credit union member,’” Post told Credit Union Journal. “If the answer is no, we ask, ‘Would you like 25 basis points off your rate? There is not a soul in the world who is not going to take us up on that offer.”
He said steps have been taken to ensure the credit union option ranks high when potential borrowers search “Student Loan” on Google and other search engines.
CUNA Mutual is using its MemberConnect engine to market directly to participating credit unions’ members who fit the target market.
Beyond just the loan, Post said there is also a market for additional insurance products for college students, such as for laptops, dorms and automobiles.
Post, who said its his view that indirect auto loans have a limited life for credit unions, added that in following years the student loan program will not have any loan cap. “We could write as much as we want to this year, but we want to see how the concept works, first.”
Until a securitization channel is opened, credit unions will carry the loans on their own books. Should that channel not materialize, Post said CUNA Mutual has talked to various private equity sources that might consider starting a company to buy the loans. CUNA Mutual won’t do so, he said, because it simply doesn’t have the capital to take on so many loans.
Separately, 18 months after launch, Post said CUNA Mutual’s MemberConnect initiative has collected 14-million new names for marketing purposes. He said the company is careful not to compete with the client credit union, but stressed the product sales through MemberConnect offer a “critical piece of fee income and a great opportunity” for credit unions. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
