WASHINGTON – A proposal to scrap credit union and bank participation in the guaranteed student loan program drew a rebuke yesterday from credit unions, already fighting to protect revenues from credit and debit cards and mortgages.
"We have concerns that the President’s proposal to move to an all Direct Loan program could create new challenges for credit union members to get the aid that they need to attend schools in the United States," NAFCU’s chief lobbyist Dan Berger, said yesterday in a letter to leaders of the House Education Committee, who were holding hearings on the Obama administration’s proposal.
The proposal would phase out participation of credit unions and banks in its Federal Family Education Loan Program in favor of the government’s direct student loans, eliminating millions of dollars in fees and interest earned by credit unions on the 97% guaranteed loans.
The Obama administration projects the switch would save the government $94 billion over ten years by eliminating the lender subsidies.
"In the current economic environment," wrote NAFCU"s Berger, "many Americans have found it difficult to get credit for a number of purposes, including higher education, and have turned to their credit unions for assistance. Credit union members appreciate the one-on-one service and support that credit unions provide them with their loans."
"We believe that any effort to change the student loan program needs careful consideration about what the true impact will be on our nation’s credit unions and their 90 million members who turn to them for financial services everyday," he added.
The proposal is just the latest hurdle appearing for credit unions in the $75-billion student loan market, following the emergence of the credit unions’ biggest partner, Sallie Mae, as their biggest competitor; recent legislation to reduce lender subsidies; and the drying up of credit in th secondary markets. More than 2,500 credit unions are registered to participate in the guaranteed loan program.
Other credit union profit centers have been under attack as well. Including the lucrative interchange fees credit unions earn on cards transactions, and fees and rates on mortgage loans.
