LOS ANGELES – USC CU yesterday said it is launching a new CUSO that will provide servicing and processing for other credit unions to offer private student loans, the latest in an expanding number of credit union initiatives aimed at helping stem the growing crisis in the student loan market.
The CUSO, the CU Education Loan Group, joins previously announced initiatives by U.S. Central FCU and CUNA Mutual Group to facilitate student lending by credit unions. Callahan and Associates also unveiled a new CUSO yesterday to help credit unions that want to participate in non-government student lending, known as private loans.
“We want to leverage our expertise in student loans,” Michael Kim, head of student loans at USC CU, said of his credit union’s new program. USC CU is one of the largest participants in the federally guaranteed program, originating $100 million a year in the Federal Family Education Loan Program, but is expanding its own participation in the private loan market in light of the turmoil in the federal program, he explained.
The Callahan project, called CU Student Choice, represents a partnership between credit unions and major back-office service providers that will perform servicing, processing and a call center, according to Jon Jeffreys, who is coordinating the project for Callahan. The loans will carry no origination fees and be priced approximately 200 basis points below the going market rates for private student loans, he said.
USC CU’s Kim said the two groups had discussed participating together, but decided against it. “Regardless of what they’re doing, we’re going full steam ahead. There’s plenty of credit unions out there,” he said.
“There’s an enormous need for this right now,” Jeffreys told The Credit Union Journal yesterday. “There is a real crisis for access to funds for the upcoming school year. What we’ve tried to do is put together an industry-wide coalition here to get this done.”
Three credit unions went live with the program yesterday: Affinity FCU, NuUnion CU and Wright-Patt CU. Four others are poised to: Digital FCU, NASA FCU, San Antonio FCU and Star One CU. As many as a dozen other credit unions are expected to join over the next few months, according to Jeffreys.
The credit unions will fund the loans and CU Student Choice will provide communications with schools, online applications, processing and servicing through a variety of well-known credit union vendors. Among them are: PSCU Financial Services, Digital Dialogue, CU Direct Lending, CU*Answers and L9.com.
