MADISON, Wis. - What do indirect auto lending and the federal student loan program have in common? A similar challenge: finding a way to turn those one-trick-pony members into fully engaged, participatory members.
“In a sense, the federal student lending program is very similar to indirect auto lending,” said Mike Long, VP-lending at University of Wisconsin CU. “The student goes to the school’s financial aid office and eventually ends up with a loan with us, the same way someone shopping for a car goes to the dealership and gets offered a credit union loan there.”
The challenge, then, is to get a member who otherwise has no real connection to the credit union and may not even really have realized he was joining a credit union or understand what that means, to become one who has multiple account relationships and is truly engaged.
And there is added incentive for credit unions to try to make this happen on the student lending side: it’s an entrée into a younger market.
“Many students come to us for one thing–the student loan–and then we try to build from there,” Long acknowledged.
Smart Financial CU in Houston tries to do just that with its College Advantage Program (CAP), which includes a credit card, a free checking account and free financial counseling, as well as the student lending program.
“What we have found is that in a lot of cases, where financial education is concerned, we’re the first point of contact,” said Smart Financial COO Dana Rawlings. “Parents rarely teach their kids how to balance a checkbook, NSF fees, courtesy pay, etc. We’ve also got our college grad auto loan program wher all we need is a letter that says that they will be gainfully employed upon graduation. That’s how we keep them after they graduate.”
As credit unions have seen their bread-and-butter auto lending continue to shrink, they have turned to other types of loans–in particular real estate and member business loans–to take up that slack. Student lending has the potential to help fill that gap, as well, but just as with indirect auto loans, CUs will have to work hard to cross sell members who join “just” to get a student loan.
“The ability of credit unions to cross is the key,” said Jon Jeffreys of CU Student Choice, a CUSO that offers a private student lending program for credit unions. “If student lending is going to become the next auto loan, credit unions have to have a plan in place to develop those members.”
USC CU created its Academic Rewards Program, which not only rewards students for doing well in school, but more importantly for the credit unions, it provides a venue and reason to be in frequent contact with the student. “The Academic Rewards Program gives students a better loan rate when they do better in school,” explained Mike Kim of USC CU. “To sign up for it, you have to opt in for a monthly e-mail that offers money management tips and other information. It’s not a hard sell. It’s about building a relationship with the student. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
