Capturing Gen Y Relationships with a Values-based Student Loan Initiative

Jon Jeffreys, VP, Callahan & Associates

It’s the perfect storm for credit unions. College costs are rising rapidly and sources of low-cost funding are scarce: Parents can no longer rely upon HELOC loans and federal student loans will be very tough to find in 2008. Federal lending limits also mean that most loan recipients seek additional funding from the private sector.

This is an ideal opportunity for credit unions to meet an important member need while simultaneously building a long-term relationship with Gen Y. CU Student Choice is a new CUSO formed by Callahans, PSCU Financial Services and several credit unions to create a private student loan product for this industry. This loan service includes online application, 24/7 support of PSCU Financial Services Call centers, and online statements and bill payment.  

This student loan product offers a long-term line of credit with a variable interest rate that is set quarterly. Graduated repayment schedules help students with lower payments as they are starting their careers. Individual credit unions will have the authority to customize terms (including pricing and minimum credit score) for their membership. These loans will be insured
by AIG.

In addition to meeting member needs, this product offers the opportunity for credit unions to gain or retain a position of trust with both parents and students by offering more favorable terms than other financial institutions. Most private college loans are offered at LIBOR + 5-6% with origination fees ranging from 3-9%. Most credit unions will opt to charge LIBOR +3% with a low (or no) origination fee.

It’s time for credit unions to build a relationship with Gen Y by funding their second biggest buying decision: Only a house is a bigger investment for college graduates. Watch for more information on this product in the next
few months.