Despite all that’s been written about student loans being the next asset bubble waiting to pop, CUNA spokesman Pat Keefe said during a Monday press call that student loans account for just 32 basis points of total industry portfolio.
Credit unions hold $2 billion in non-federal guaranteed student loans, a 43% increase over the previous year, he added.
CUNA Chief Economist Bill Hampel said the concentration risk is so low, even if every last one of them failed the total loss would be smaller than the current industry loan loss rate. Low concentration also means student loans could help diversify loan portfolios, not make them riskier, he said.
Vince Passione, CEO of Fynanz Inc., a technology company that provides a private student lending platform to 581 credit unions, was a featured guest on the call. He said private student loan delinquency rates do run higher than other loans – 1.45% for student loans compared to 1.13% overall.
However, he said credit unions have been insulated from private student loan losses because they got into the market after new regs were put into place, like higher underwriting standards, payments due before graduation, and more financial education literature.
“Credit unions have always been conservative in their underwriting, so their members are only borrowing what they can afford to pay,” Passione said.
The growth in young members is being drawn by co-signing parents, said Paul Gentile, CUNA’s new executive vice president, Strategic Communication and Engagement. He pointed out the average age on a private student loan is around 49, the same as the average credit union member.