Credit Unions Developing New Student Loan Products and Networks

With continuing news about private students lenders leaving the market, credit unions seem to be  hoping to develop a toehold in the student loan market during these turbulent times.  While schools will often include a local credit union on their lender list, the industry seems to be moving more towards developing a credit-union specific product and network.  This will reduce their reliance on lenders and servicers.   Here are just a few of the larger initiatives that I recently came across:

• CUNA Mutual:   recently launched their CompleteEd program which according to their website

• "CompleteEd is a new school-certified, private student loan program from CUNA Mutual Group, a trusted partner of the credit union industry for more than 70 years. Initially, the program is being offered through credit unions, with plans to expand directly to consumers. CUNA Mutual is currently conducting a beta test of the program with a limited number of credit unions." 

• Here are a few of the credit unions currently offering this loan:
  • Royal Credit Union (Wisconsin)
  • Como Northtown Community Credit Union (Minnesota)
  • AEA Federal Credit Union (Arizona)
  • Credit Union of Texas(Texas)

•  CUNA is advertising prominently on Google Sponsored Links as this search indicates (see CompleteEd.com) so it would appear that they have incorporated a direct-to-consumer site. 

• Credit Union Student Choice:  launched in May 2008; indicated in press release today that they have originated $25 million in student loans through 16 credit unions that they have enrolled in the program.  

• One unique feature of their product is that it is "structured as a line of credit, which allows students to make multiple draws over the course of their entire college career after completing just one simple application."

• Founded by a group of the nation’s leading credit unions

• Here are the 16 credit unions currently live on the network (with their asset size):  Affinity Plus FCU ($1.4B), Alabama CU ($282M), Digital FCU ($4.1B), Directions CU ($518M), Eli Lilly FCU ($828M), Irving City Employees FCU ($36M), Leaders CU ($105M), Members 1st FCU ($1.5B), NASA FCU ($900M), Northwest FCU ($1.6B), NuUnion CU ($812M), San Antonio FCU ($2.5B), Star One CU ($3.8B), Visions FCU ($2.1B), Workers CU ($595M), and Wright-Patt CU ($1.4B).

• Here is an interview with Eastman Credit Union, which claims to have the largest private student loan program among credit unions.  With a portfolio of only $26 million dollars, it is clear that Eastman is one of the rare credit unions holding their loans.  Most credit unions seem to happy to originate these loans before handing the loan off to be funded and serviced.  This dependence on servicing arrangements is one reason that some credit unions ceased lending operations earlier this year.  

These lending networks and new product offerings that are being developed by credit unions seem driven by a few factors:

• To take advantage of credit unions, which as a class have stronger balance sheets than their for-profit banking peers.  While the WSJ recently reported on mortgage issues at corporate credit unions, the smaller run of the mill credit unions have been relatively unscathed.

• Many credit unions were hurt earlier this year as servicers sought to renegotiate their partnerships, leading many credit unions to walk away from the student loan business.  Creating a credit-centric network with a servicing component would seem to ameliorate this issue assuming that what they would give up on scale would be assisted by lower profit margins required by the credit union servicer.