Feds Intervene To Rescue Student Loan Market
WASHINGTON–The Bush administration unveiled its plan last week to bail out the troubled student loan market by offering to buy federally guaranteed loans from lenders and eventually providing emergency funding so the lenders can make more loans.
The effort, enabled by emergency legislation passed last month, comes as millions of students are applying for financial aid in preparation for the fall’s academic semester.
Under the plan, the Department of Education will pay the face value of the loans, plus accrued interest and the cost of fees lenders incur when originating the loans. Lenders would also get a payment of $75 per loan. The government has also agreed to invest in pools of loans in order to pump new liquidity into the secondary market, which has been hit by the exodus of dozens of lenders in recent months.
CU participants in the student loan market were watching to see how the plan will affect them. “We feel it’s a good step towards curbing the exodus of student loan lenders and provides an adequate back-up plan to sell loans to (the Education Department) for those lenders needing liquidity to make new loans,” said Michael Kim, head of student lending at USC CU. He said there are still several questions to be cleared up, including how the borrower will benefit and what will happen to ACH discounts in repayment.
U.S. Rep. Paul Kanjorsk (D-PA), who has been working to get the government to intervene in the market, said situation is urgent as it comes at the start of the peak origination season. He urged the agency to allow existing lenders to continue to administer and service the loans to avoid borrower confusion and frustration.
CU Inks One-Card Deal With School
PROVO, Utah–Utah Community CU has signed a deal with Utah Valley University to provide a campus “one-card” that will act as a Visa debit card as well as a student ID and bus pass.
The card cannot be used as a debt-accumulating credit card but will be usable to pay for on-campus activities, such as checking out books or making copies at the school library, making the university the first in the nation to combine all these functions into a single card.
University officials specifically targeted the credit union for its one-card because about 20% of the students already have accounts there.
Utah Valley State College is changing its name to Utah Valley University on July 1. The new cards won’t be available until after that date.
Branch Pays Homage to City History
MINDEN, Nev.–Members of Greater Nevada CU may be brought back to a different era when they visit the credit union’s newest branch here–with a miniature grain silo as its entrance and the barn-shaped main lobby.
The unique architecture of the Carson City-based credit union’s 11th branch pays homage to the old Minden Flour Mill which was a fixture in this agriculture community for many years.
The inside of the branch is a modern structure with high, slanted ceilings, steel rafters and large windows. A grand opening is scheduled for next month.
Greater Nevada CU is the state’s fourth largest credit union with $500 million in assets and more than 52,000 members.
University CU Asks To Add Students
BOSTON–The $43-million University CU, founded by a group of Boston University employees and now serving employees at a dozen Boston area colleges, has asked state regulators for permission to serve as many as 100,000 students at those schools, as well.
“We’ve talked about it for a lot of years, about including students; we thought it was time,” William Sinibaldi, president of the credit union told Credit Union Journal.
The inclusion of students follows similar trends at college credit unions across the river at Harvard and MIT, which expanded from employees to students in recent years, said Sinibaldi.
University CU, which is located on the campus of Boston University serves employees of Boston College, Tufts, Bentley, Berkeley College of Music, Fisher, Lesley, Suffolk, Newberry and several others.
If the expansion is approved by the Massachusetts Division of Banking, plans are to step lightly into the student market at first, said Sinibaldi. Initially, they will market to incoming freshmen at B.U.
