WASHINGTON -- Most credit unions have less at stake than banks regarding legislation that passed the House proposing cuts to student lending subsidies, according to CUNA.
The College Student Relief Act of 2007 (H.R. 5), according to a Library of Congress summary, which would phase-in cuts in the interest rate charged undergraduate student borrowers under the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs, reducing the interest rate from 6.8% in July 2006 to 3.4% in July 2011. It would also pull back lender insurance on FFELs from 97% to 95% of the unpaid balance and reduce special allowance payments made to FFEL lenders to compensate them for the difference between FFEL interest rates and market rates with a care-out for small lenders from such a reduction, among other things.
The Congressional Budget Office estimated that the changes would reduce federal direct spending by $65 million over the 2007-2012 period and by $7.1 billion over the 2007-2017 period.
The legislation passed the House overwhelmingly.
"Credit unions have some concerns but they don't rise quite to the same level (as the banks)," CUNA Vice President of Legislative Affairs Dean Sagar said. He explained that some credit unions are involved in student loan programs, but of the top 100 student lenders the highest credit union on the list is University of Southern California Credit Union placing 60th. He said CUNA has been working with some individual credit unions on the potential changes, but they are going to continue to serve their members.