NEW YORK-With the number of U.S. college students near an all-time high, there continue to be opportunities in student lending for credit unions as a new school year approaches.
That is the message from Jim Merrill, SVP for Fynanz, and Alice Stevens, chief operating officer at $180-million First Financial FCU, Wall, N.J., and also chair of the cuStudentLoans CUSO, which serves 140 CUs.
Merrill, whose company offers a technology platform to 175 credit unions that enables creation of private label student loans, said lending statistics for Q3 and Q4 in 2011 showed strong growth in student loans.
"And there still are tremendous growth opportunities in 2012," he declared, noting there are 19-million people enrolled in colleges today. "Student loans are relevant to the Gen Y demographic, which many credit unions are very focused on. The average age of credit union members is 48, 49, and many people that age are looking to put their children through school. Student loans fulfill product needs for both the students and their parents. More than 80% of in-school student loans are co-signed for by parents.
Stevens said First Financial FCU was one of the original 17 credit unions in New Jersey that founded the CUSO before it went nationwide, adding that most of the credit unions involved see student lending as a membership opportunity to bring in younger members, and also their parents.
More Help For Parents
"Beyond student loans, we can help the parents consolidate other loans, get better balances on their credit cards and other cross-sell opportunities," she said. "Consolidation loans also fulfill a need: we bring in a young person who is graduating from an institution and is looking to buy a house or a car. We can be front-and-center for those big life stages. We see the student loan as just the beginning."
Merrill said there is also a $40-billion-plus market opportunity in consolidating the student loans held by graduates. He said consolidation products are "beneficial to credit unions," because there is cash flow right away, as opposed to in-school loans, which have tend to very low payments, sometimes just $25 per month, during the deferral period.
"We have seen credit unions struggle to make loans the past couple years, obviously due to the economy," Merrill assessed. "So offering private student loans gives them another asset class to make loans in and another opportunity to leverage their deposits to make loans."
