Members Cooperative Credit Union in Cloquet, Minn., has joined tri-state area credit unions in the network as the first participating credit union in Minnesota. Currently 21 credit unions in New Jersey, Pennsylvania, New York and now Minnesota participate in the network.
The cuStudentLoans.org network works as a cooperative student lending program where the participating credit unions pool funds and spread risk. Each credit union owns 10% of the loans distributed.
The Fynanz technology platform powers the cuStudentloans.org portal and insures the loans.
Robbie Thompson, vice president and general counsel at Members Cooperative, said that the credit union wanted to enter the student lending market to better serve all demographics of membership, attract younger members, be there at each state of its members lives, diversify its portfolio and aid in limiting interest rate risk.
To determine interest rate and creditworthiness on the cuStudenLoans.org loan, which is called the EdAccess Loan, the credit unions use what is called the Fynanz Academic Credit Score. Fynanz looks at the FICO score of the signer and co-signer and the member's probability of graduation by examining the students major, years of study and grade-point average. While in school the student has to make a monthly $25 payment on the loan that gets applied to the interest and principal in order for the student to get used to making monthly payments. Each year the underwriting on the loan is rewritten, which gives the student the opportunity to lower the rate.
"I will tell you that the two primary reasons we chose Fynanz was because of the culmination of things they did to minimize the risk," Thompson said. "As a credit union we have an obligation when giving loans, especially to young people, to educate them about borrowing and credit. These loans not only help students fund their college education so they can reach their dreams, they also make the student more knowledgeable about borrowing and establishing good credit in the future."
Fynanz CEO Vince Passione said that during this past peak lending season, the program saw approximately $90 million worth of loan requests and 90% of those approved for loans were new credit union members.
Passione said that he will be going around to schools and credit unions in Minnesota to expand the program so it can have a statewide focus there. Passione said that he is also looking to expand the program to credit unions in California, Illinois, Washington, Missouri and Nebraska.
"The beauty of the program is that you can position it locally or nationally. I can go into schools and say that I can guarantee that their students will be eligible to join one of our participating credit unions."