Private student loans can benefit CUs.

A common theme of the 2018 fourth quarter reports of many U.S. financial institutions has been the rising cost of deposits. Quarter over quarter, deposit rates have accelerated at the fastest pace since the start of the current interest rate cycle, according to financial services analysts. A KBW research report in mid-January 2019 cited an increase of 60 bps in three-year CD offering rates, an increase of 53 bps in one-year CDs, a bump of 14 bps in money market rates and an increase of four bps for savings accounts.

This recent jump in deposit interest rates underscores the need for banks and credit unions to better control their costs of funding – an achievable goal with the help of student lending products. Not only do private student loans represent a quality asset class, but they have the potential to attract “sticky” account relationships that can be highly cost-effective for lending institutions.

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