HARRISBURG, Pa. -- The roiling of the secondary student loan market and a halt to direct funding by a state agency prompted quick action last week by the Pennsylvania Credit Union Association to assist CUs transition to new funding vehicles.
As a starter, PCUA officials said the trade group would help some 90 CUs move into the existing TEAMS program ( the Education Asset Management System) a cooperative venture developed by PCUA and the Pennsylvania Higher Education Assistance Agency.
Until PHEAA suspended direct underwriting under the Federal Family Education Loan program March 7, many of the 90 CUs received a fee for referring loan applications to the agency.
During recent weeks, the Pennsylvania agency is one of a handful of state-run education agencies buffeted by credit or bond sale difficulties. Problems with selling student-loan backed debt surfaced in Iowa and Montana with concern expressed by lawmakers and lenders in other states as well.
To assist its members, PCUA said it would be hosting an April 2 Web seminar with officials of PHEAA answering questions and discussing available options, including direct funding of the loans by CUs.
"What has happened in Pennsylvania is that one of the lenders or competitors has now been taken out of the picture," explained Greg Smith, president/CEO of Pennsylvania State Employees Credit Union, a large funder of student loans under PCUA.
Despite the agency's problems, PCUA officials maintain CUs now have an opportunity to fill in loan gaps to aid students. "This is really a positive development for credit unions now willing to fund the loans," said Robert Henchey, PCUA senior vice president.
PHEAA had said it would continue offering student aid programs and services but would help with a transition to other lenders prepared to pick up additional loan volume. About 500,000 Pennsylvania students attend postsecondary school in the state with the assistance of the low-cost FFELP loans.