Private student loans comprise 0.32% of credit unions' total loan portfolios as of 3Q 2012, according to Callahan & Associates data, a small hike from 3Q 2011's 0.23%.
According to the Washington-based research and analysis firm, outstanding private student loans at credit unions total just over $1.9 billion as of 3Q 2012 — an increase of around $600 million in the past year.
Additionally, the number of credit unions that hold private student loan balances grew from 488 in 3Q 2011 to 581 in 3Q 2012, Callahan said.
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"As the demand for higher education increases, federal loans still cannot cover all education expenses," said Andrew Bolton, senior industry analyst for Callahan. "Credit unions are filling a valuable and real gap."
Bolton said the asset quality of private student loans at credit unions remains much better than that of federal student loans, with a 1.45% delinquency rate and 1.05% annualized net charge-off rate. According to a November 2012 Federal Reserve Bank of New York report, 11% of all federal and private student loans are 90 or more days delinquent.
"This is partially due to the fact that unlike federal loans, which are need-based, the loans that credit unions offer are underwritten by credit and other risk criteria, and scrutinized before acceptance just like any other type of loan that they offer," Bolton said. "They are not very similar to federal loans, because those are granted without any sort of credit underwriting or risk evaluation of the borrower."
Going into 2013, Bolton said he predicts credit unions with private student loan portfolios will continue to be conservative with the number of student loans they make, and that credit unions entering the private student loan market will do so on a trial basis and with assistance from student lending CUSOs.
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
