WASHINGTON — MIT Federal Credit Union exemplified the opportunities that exist for credit unions in this current market by taking the place of Citibank as a lender for private student loans at the MIT Sloan School of Management.
This past fall, Citibank terminated its no co-signer CitiAssist student loan program, which many international students depended upon to fund their education. Many of the top schools across the country, such as the University of Pennsylvania's Wharton School, Cornell's Johnson School and Harvard Business School, were left scrambling to find a loan solution to offer students. So far, MIT Sloan School of Management is the only school that has announced a replacement program.
"They took a hatchet to what could have been done with a scalpel. They ended all international agreements, and the entire program with international students across the board for a few hundred schools even if they were making money on them," said Scott Patterson, executive vice president for the CUSO Credit Union Student Choice, which helped orchestrate the loan program between MIT FCU and the Sloan School.
MIT FCU is one of the 12 owners of the CUSO Credit Union Student Choice that was launched in May 2008. Had it been a year earlier that the business school approached the credit union for help, Patterson said the credit union would have had to turn them away since it wasn't a part of the CUSO then and wasn't offering student loans.
MIT FCU had been working with CU Student Choice to develop its undergraduate loan program when it was approached by the business school to offer the loans targeted for its international graduate students.
Patterson said that CU Student Choice sat down with MIT FCU and the school to negotiate the program and determine the level of risk and who would take on the risk.
"What really makes this unique is not just that a $300 million credit union replaced a goliath bank, but that it was done with a partnership with the school that is not just going to be a short-term thing."
The program that was put together differs from the previous program offered by CitiAssist in that MIT FCU is offering a line of credit as opposed to a loan. With CitiAssist the student had to apply each year for the loan, and now the student applies only once. MIT FCU will finance up to $170,000, which is more than being offered before, with zero origination or prepayment fees, a variable interest rate as low as prime rate plus two points, a 20- to 25-year repayment period, graduated repayment options and a 25 basis point discount for auto payment.
"While we may not have the brand name or asset size of mega bank lenders, we have a business model that makes us perfectly suited to meet the private loan needs of MIT students," said Brian Ducharme MIT FCU president/CEO. "We've always maintained a singular focus on serving our community with cost effective products and services. This clarity of purpose has allowed us to grow and thrive at a time when many publically traded lenders are struggling for mere survival."
Another key point behind the program Patterson pointed out was that MIT FCU has two branches located on the MIT campus, which will allow the credit union to enhance its relationship with members that take advantage of the loan.
Details of the program can be found at
www.mitsloan.studentchoice.org.
–lsiegriest@cutimes.com

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MIT FCU Replaces Citibank as Lender for Top Business School

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