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Credit Unions Fill in the Financial Aid Gap with Private Student Loans

Credit Unions Fill in the Financial Aid Gap with Private Student Loans By Cyndi Cohen
Published January 15, 2013
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Those pursuing higher education know that it comes with a large financial commitment, one that should be well understood and wisely financed. If you’re a credit union member, you already have a partner whose primary goal is to help you finance your education in the smartest way possible and provide you with the tools, products, and knowledge to do so.

Private Student Loans: A Win-Win for Credit Unions and Students

Credit unions themselves, as well as providers of higher education financing solutions via credit unions, are helping young people fund their education through affordable private student loans. These loans help fill the gap that federal funding can leave behind. In fact, during 2012, credit union funded private student loans gained popularity when student loans in general were waning. One reason for this positive reputation is a credit union’s commitment to member service and education above all else. Credit unions ensure that student members understand they’re dealing with loans and should work to obtain “free” money first.

For credit unions, private student loans not only perform well with a low delinquency rate making for a quality portfolio, they also help attract members of Gen Y form deeper financial relationships with them. All in all, student loans have proven to be healthy for the credit union and beneficial to young borrowers.

Providers Bring Credit Union Loans to Students in Need

Oftentimes, students and their parents need guidance in terms of deciding whether or not to take out student loans, finding the right loans to fit their needs and/or getting connected with a local credit union. CUSOs (credit union service organizations) like cuStudentLoans and Credit Union Student Choice work to fulfill this need.

cuStudentLoans, one of the industry’s leading private student lending marketplaces, helps credit unions of all asset sizes and fields of membership. Powered by Fynanz, Inc. a leading technology provider of web-based private student lending networks and solutions serving more than 230 credit unions nationwide, cuStudentLoans provides students access to the industry’s largest network of credit unions that provides a common loan product for both an in-school private student loan and a private student consolidation loan product.

In addition, students are provided access to membership through a credit union for which they qualify. According to Jim Merrill, Senior Vice President, these loans are among the most competitive loans available in the market place and provide consumers access to affordable competitive sources of funding to pay for educational related expenses. Plus, the process is supported through a tremendous amount of financial literacy support provided to clients at no charge.

Before deciding on a student loan, Merrill advises students to complete the FAFSA form early in the calendar year (January or February) for the upcoming academic year starting in September. “Use all free and federal aid first before applying for a private loan and definitely use a credit union to get your private loan from for the best deal.”

Merrill adds that, generally, credit unions are more consumer-friendly and have products more competitively priced. “I believe credit unions have done a great job of providing affordable and competitive priced solutions to allow members and consumers access to loans to help pay for the cost of higher education.”

Credit Union Student Choice is another leading provider of higher education financing solutions to America’s credit unions, now serving nearly 250 credit unions and their 20 million members. “Founded, designed, and owned by several of the nation’s leading credit unions and credit union service organizations (CUSOs), Student Choice enables our credit union partners to efficiently and prudently enter the private student lending market,” says Michael Weber, VP Marketing. CUSC manages key operational challenges (such as loan origination and processing, loan certification via the college’s financial aid office, and loan servicing) while placing credit unions in full control, allowing them to deliver maximum value to students and families.

Through the Student Choice cobranded website, students are able to learn about the Student Choice private lending solution while also benefitting from a plethora of resources and advice regarding the best ways to pay for college, as well as online application and a 24/7 call center with student lending representatives.

The Student Choice solution also features zero origination fees, competitive rates as set by the credit union, flexible repayment options, and the ability to borrow from - and build a long-term relationship – with a credit union that students can trust.

Like Merrill, Weber encourages students and parents to always remember “free, cheap, gap.” “First and foremost, they need to work diligently to maximize free sources of financial aid, such as scholarships, grants, and school financial aid. Secondly, they should take advantage of Federal student loans as they are the “cheapest” financing option and provide the most consumer-friendly terms.” Only then, says Weber, should students consider a private student loan to finance any remaining gaps (the difference between the school’s cost of attendance and other financial aid).

Credit Unions Committed to Member Education

Hanscom Federal Credit Union (Hanscom AFB, MA) offers a student loan option featuring risk-based pricing, complete electronic process including electronic signature capability, dedicated call center support, no upfront fees, minimum in-school payment of $25/month to establish good payment habit and credit history, and no prepayment penalty.

However, despite the credit union’s affordable product, in true member-friendly style, Thomas M. Becker, Senior Vice President of Lending, advises members to exhaust all other sources of financing including grants, scholarships, federal student aid and home equity, if possible before considering private student loans. “HFCU offers private student loans to our members as an affordable last option to finance and complete their college education,” adds Becker.

Likewise, Purdue Federal Credit Union (West Lafayette, IN) offers private student loans with zero origination or prepayment fees, low interest rates, flexible repayment terms and an option to defer all payments while in school. According to Tracey Linder, Consumer Lending Manager, Purdue Federal’s loans differ somewhat from other private student loans in that they are a convenient line of credit that helps students secure financing for their entire undergraduate career without the lengthy reapplication process. The loans also are considered school certified which means the student can only borrow their unmet need which reduces the risk of students borrowing and spending more than is necessary.

“We want to be the students’ trusted financial partner for life, and their success is important to us -- making sure funds are school certified to keep the student from taking on unnecessary debt is an important benefit of our program,” adds Linder. Plus, if a co-borrower is required on the loan, they could be released after 48 months of timely payments.

Akin to Becker’s advice, Linder suggests that students find out any deadlines for the schools they’re interested in as well as file their FAFSA forms even if they don’t think they’ll qualify for aid. “Our private student loans were designed to help our student members finance their dreams of obtaining a higher education by filling the gap between the cost of the education and any free or cheap money to ensure the student doesn’t take on unnecessary debt,” contends Linder.

If you are a young person planning for college or the parent of a student, why not look to your credit union for advice and financial support? Not a member? Check out the CUSOs above or find a credit union and join today. You may be pleasantly surprised to find a helpful partner whose focus is your financial independence and future success!

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