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Credit unions consistently seek new opportunities to drive growth, deepen member relationships, and support community prosperity. One area ripe for strategic development is education lending, which offers credit unions a compelling way to connect with younger generations and their families. In this webinar, we introduced our exciting new partnership with LendKey Technologies, highlighting how credit unions can leverage student loans to reach younger members, enhance their strategic goals, and support long-term growth.
Ben Hering, Director of Partnerships at CUCollaborate, welcomed Ryan Giffin, Head of Client Success at LendKey, to discuss how credit unions can leverage student lending solutions to attract younger members and advance strategic initiatives like LID and CDFI certification.
Ryan shared insights about how education lending can create lasting relationships with younger members, clarifying common misconceptions around private student loans and highlighting how credit unions are uniquely positioned to address critical member needs in higher education finance.
Credit Unions and Education Lending Opportunities
The Critical Need for Student Loan Solutions
The cost of higher education continues to soar, even as financial aid programs face budget cuts. In fact, Pell Grants now cover less than 25% of college costs compared to 75% in the 1970s. Additionally, reductions in DEI scholarships further limit funding options for many students.
These financial gaps create significant opportunities for credit unions to step in, supporting students and their families precisely when they're in need—positioning your credit union as a trusted financial partner from day one.
Private vs. Federal Student Loans: Clarifying the Difference
Ryan emphasized an essential distinction: private student loans are fundamentally different from federal student loans. LendKey’s private loans are credit-based, similar to typical consumer loans, involving standard underwriting criteria such as credit scores and debt-to-income ratios. With $7 billion in student loan assets already held by credit unions, there’s clear evidence that this asset class provides a stable and profitable opportunity.
Deepening Member Relationships Through Education Lending
Student loans offer credit unions an ideal gateway for attracting young members at a formative financial moment. These relationships frequently extend far beyond college graduation, with student borrowers often remaining loyal members for an average of 14 years. As Ryan highlighted, when credit unions provide student loan solutions, they’re:
- Helping young members build a strong credit profile early
- Establishing lasting loyalty by offering timely financial support
- Enhancing their ability to offer members additional products and services post-graduation
Understanding the Student Loan Market
Ryan provided valuable insights into two distinct student lending products offered by LendKey:
- Private Student Loans (In-School): These average around $12,000 per year and typically require a co-signer, reducing credit risk. This lending helps students bridge critical financial gaps when federal aid and scholarships fall short.
- Student Loan Refinancing: Post-graduation, student loan refinancing helps members simplify debt payments and improve their financial health. The refinancing market offers significant growth opportunities for credit unions, especially as interest rates eventually decline.
The LendKey Advantage: Simplified Entry into Student Lending
One of the biggest hurdles for credit unions considering student lending is the perceived complexity. Ryan outlined how LendKey simplifies the process through:
- Full consumer acquisition support, including customized landing pages and integrated marketing efforts
- Comprehensive loan servicing, from origination through repayment, relieving credit unions from operational complexities
- Flexible liquidity management options, including the ability to participate in loan pools, reducing risk while diversifying loan portfolios
Q&A Highlights
Participants posed a range of questions, addressing practical considerations around risk, servicing, and marketing.
Q: How do these student loans perform?
A: Private student loans through LendKey have demonstrated strong performance, with delinquency rates below 1% for both new student loans and refinancing options, reflecting prudent underwriting and responsible borrower profiles.
Q: Who handles loan servicing?
A: LendKey manages all servicing internally through a dedicated, specialized servicing center in Blue Ash, Ohio, ensuring seamless handling of unique student lending requirements.
Q: What if our credit union isn’t ready to fully commit to student lending?
A: LendKey offers flexible solutions, including referral options and risk-sharing programs, enabling credit unions to participate without significant upfront commitments.
Key Takeaways for Credit Union Professionals
- Student lending provides a unique strategic opportunity to attract and engage younger members
- Partnerships, like the CUCollaborate-LendKey relationship, simplify entry and expansion into student lending markets
- Strong performance and manageable risk make private student loans a valuable addition to credit union lending portfolios
Ready to Grow? Let's Connect! 📞
If you missed the webinar but want to learn more about leveraging student loans for strategic growth, schedule a call with our team today!
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