In June 2010, the $2.03 billion Basking Ridge, N.J.-basedAffinity Federal Credit Union acquired the $2 million NewBrunswick, N.J.-based Rutgers University Student &Alumni Federal Credit Union, which had served more than 2,000Rutgers University students and alumni at three Rutgers Universitycampus locations (New Brunswick, Newark and Camden).

Could other school-related credit unions meet RUSA FCU's fate?Filene Research InstituteResearch Director Ben Rogers thinks so.

“School-related credit unions are subject to the same economicsqueeze as all other credit unions and that squeeze has beenpushing consolidation for a long time,” Rogers said. “Given thatmany school-related credit unions like RUSA FCU are smaller thanaverage, the challenge to grow and offer relevant products iscompounded.”

According to Rogers, the credit union's poor financial conditionled to its acquisition. Rutgers University's other credit union,the $71 million Rutgers FederalCredit Union, serves Rutgers University faculty out of its NewBrunswick, N.J., headquarters. It considered a merge with RUSA FCUin 2009, CUNA said.

Upon RUSA FCU's acquisition, the credit union's board ofdirectors was dissolved, and Affinity FCU now serves around 2,000Rutgers University students and alumni as part of its membershippool of about 136,000, Affinity FCU Vice President of MemberExperience Donna Lostocco said.

While the Rutgers University Student Assembly supports themerger, it opposes the university's decision to not renew the leasefor the credit union's New Brunswick campus branch, said CharlieKratovil, who served on the RUSA FCU board of directors from 2009to 2010. The Newark and Camden branches became Affinity FCUbranches at the beginning of the current school year and willcontinue to operate along with 19 other Affinity FCU locations. TheNew Brunswick branch will close its doors on May 20.

Lostocco said Affinity FCU plans to open a new branch to replacethe New Brunswick branch at an as-yet-undetermined location.

John Milazzo, president/CEO of Baton Rouge, La.-based $438million Campus Federal Credit Union, said he does not believe amerger trend would be isolated to school-related CUs.

“If this economy continues like it is, mergers could be a trendin all sectors of credit unions, not just school-related ones,”Milazzo said. “In some cases, a merger is the best option.”

Campus FCU servesmore than 59,000 Louisiana State University faculty, students andalumni, with faculty making up the majority of its membership,followed by students and then alumni, Milazzo said.

School-related CUs do, however, encounter their own set ofchallenges. Rogers said they often face what he calls adouble-edged sword–on one hand, their on-campus locations driveconvenience, but on the other hand, many students are unfamiliarwith the sheer concept of a credit union.

“They often have to close the equivalent of a cold-call sale,because everybody knows who Bank of America is, but what's thiscredit union thing?” Rogers said.

Rogers also points out that school-oriented credit unions cansuffer if they're not electronically up-to-date. Lending can alsobe tougher for them than for the average credit union, given thattheir members are not stable, full-time wage earners, he said.

“College students have an increasingly electronic sense of whatconvenience means, and if the credit union isn't set up with afunctional suite of remote delivery, then even a branch in thestudent union may not attract a lot of new members,” Rogerssaid.

Milazzo said it's difficult to attract young members becausethey tend to bank where their parents bank. He also citesprofitability as a challenge given the economic hits recently takenby its sponsor, LSU, as well as growth–Campus FCU has been “growingtoo fast on the deposit side but not on the lending side,” hesaid.

But school-related CUs enjoy the advantage of a large pool ofpotential new members every year, as well as the opportunity tocultivate new credit union advocates, Rogers and Milazzo said.

“I've always believed that credit unions have a great sociallyresponsible story to tell, and that story finds eager ears amongcollege students,” Rogers said. “But college students are alsohard-nosed. They don't just want to hear a socially responsiblestory, they want to see what it looks like in the real world.”

Convincing college freshmen, whom Rogers calls “America's mostdistractible demographic,” to join a credit union requiresaggressive marketing. Milazzo said his credit union's strategyinvolves working closely with student organizations and sponsoringuniversity events. He added that Campus FCU often finds successwith the foreign student market, as they do not arrive on campuswith an established banking relationship through their parents andare in need of local, convenient banking services.

“I think that those students who care enough to check us out areimpressed,” Milazzo said.

With the average credit union member age at 47, could futureacquisitions of school-oriented CUs delay the goal of bringing thataverage age down? Rogers believes the contrary.

“I think a larger credit union that merges with a smallerschool-related credit union is better positioned to impact theaverage age of credit union members,” Rogers said. While studentcredit unions can attract young members, they're often ill-equippedto keep them after they leave campus, he said.