TruMark Financial Credit Union is not new to the student lending market-in fact, it has been making such loans for decades. However, when the Obama administration made changes to federal student lending in July, the Trevose, Pa.-based CU revised its products and services. To help members fill the gap between federal funding and the actual costs of college, the credit union chose to partner with a CUSO, Credit Union Student Choice, to offer private loans.
Since CUSC's founding in 2008, its CU clients have funded more than $260 million in private student loans to nearly 20,000 students. The CUSO's 160 credit union partners range in size from $20 million in assets to nearly $9 billion.
The $1.3 billion TruMark is projecting about $1 million a year in student loan applications for the first couple of years, according to Chief Lending Officer Lisa H. Albany. Although student loans are currently a small percentage of the CU's assets, "we would like to see student lending become a larger part of our loan portfolio and our future growth strategies," she said.
Mike Weber, vice president of marketing at Credit Union Student Choice, said the CUSO's credit union clients determine the ROI on the loans because they are able to control the interest rate. He pointed out that strategy differs from one CU to the next depending on geographic location, structure and economic situation. However, all CUs must strike a balance between returning a good value to their bottom lines and delivering good values to members.
Weber said that nationally, the average rate on a private student loan is about 8.5% or 9%. For CUs involved with CUSC, the average rate is 6.25%.
While other programs bring in loans from all over the country, CUSC allows the credit union to have a direct relationship with borrowers from the community it serves. That puts the credit union in a better position to develop a genuine, long-term relationship with the borrower, Weber said.
And CUSC would like to help make that happen. Although the CUSO's primary focus is having a good program to deliver private student loans, its to-do list includes providing resources for credit unions to be able to take the next step with borrowers, Weber said.
As Albany at TruMark pointed out, CUSC already provides turnkey lending services, including loan origination, loan servicing, regulatory compliance, web services, a 24/7 call center and marketing materials. Albany plans to market the CUSC loans through its financial literacy program at local high schools.
"We want to be able to offer the product to attract new, younger members to the credit union," she said. "We try to use the student lending program to develop long-term relationships."