MADISON, Wis. – CUNA Mutual Group plans to roll out a student loan program for credit unions–just as liquidity in this critical market is drying up due to the ongoing credit crisis.
Plans call for a web-based loan application open to any borrower, Jeff Post, CEO of the credit union insurer, told The Credit Union Journal. Once that borrower has identified a home address and university or college, he or she will be presented with the option of joining a credit union.
If the person signs up to be a member, he/she will receive a 25-basis-point reduction on the loan’s rate.
The prospective member would have to go to the credit union to join. Post said CMG plans to securitize the loans and sell pieces of the loan pools back to credit unions in an effort to stimulate a secondary market for the paper.
The program comes as several major lenders have exited the guaranteed student loan program in recent weeks, causing an expanding liquidity crisis. The lenders cite both the major cutbacks in federal subsidies under last year’s student loan reform and a drying up of funding in the secondary market, where most credit unions sell their student loans.
