According to one recent study, about 43.5 million people in the United States alone have student loans of some kind. While it's absolutely true that not every credit union offers student loan refinancing, the ones that do—and that do so strategically—often find great success.
Like all services you offer to members, there are pros and cons to embracing student loans. In order to make the most informed decision for your organization, it is crucial to have a deep understanding of the challenges and payoffs of offering student loans.
All told, there are a myriad of different, positive reasons why you would want to offer student loan-related services to your members. They include but are not limited to the following:
1. Increase Loyalty: It's a terrific opportunity to serve your membership in the way that only a credit union can. Student loans can be frustrating and overwhelming. This is a chance to ease those concerns and again prove your value in someone's life. Being in a position to not just answer them but to provide a solution is a great way to increase loyalty.
2. Reach a New Type of Member: It's the perfect chance to target a new group of members that you may not be making as much of an impact with as you'd like. There's no reason why you can't leverage student loans into helping members to use other services and develop a long-term relationship, too.
3. Expand Your Service Offering: Student loan refinancing products can be another way to diversify your credit union's overall portfolio. That way, your entire organization is more protected in terms of risk tolerance as it is unlikely a single economic event could negatively impact all products.
4. Get Involved: Student loans are an opportunity to ramp up community involvement. Even going beyond the products themselves, they can become a part of your organization's continued financial education initiative to empower both students and their family members in the areas that you serve.
5. New Marketing Opportunities: They can be another way to get your credit union's name out there. Similarly, offering student loans opens the door to starting a relationship with not only more members but also local schools and other educational institutions in the area. It's also another way to differentiate yourself from bigger banks since most of them stopped offering student loan-related products years ago.
There are also a number of possible downsides to offering these services--or, at the very least, obstacles that will need to be overcome. These will include things like:
1. Not Everyone Needs Student Loan Help: Even though millions of people around the country have student loans, it's still likely to be a very small segment of your business. Most people need car loans or mortgages. Not everyone will need a student loan.
2. Growth Can Be Slow: Members may be slow to adopt, especially if they've already recently refinanced. You may not see the immediate impact to your bottom line that you were hoping for.
3. You Will Need to Educate Members: It will require a lot of outreach and education on your part. If members are in the market to refinance their student loans, it may not immediately occur to them that they should do it with you.
4. Minimal Revenue Increase: By their nature, student loans may not be a quick fix terms of increasing revenue. They will certainly help, yes--but again, this is a situation where "slow and steady wins the race." For the best results, you'll want to think of it less as the centerpiece of your larger strategy and more as just one of many techniques that your credit union is offering.
5. Loan Volume Has Decreased: The FFEL federal student loan program ended in 2010. Because loan volumes have decreased since then and profits are no longer guaranteed, there is little incentive for credit unions to offer student loan refinancing.
Given the list of advantages and disadvantages outlined above, decide if offering student loans makes sense for your organization. Many credit unions don't offer student loans. But if yours does, you're looking at yet another opportunity to get more personal in terms of your member experience than ever, all while also differentiating yourself from your competitors.
If you're looking to streamline your student loan process, it's important to remember that borrower expectations have shifted towards simplicity, convenience, and speed in digital lending experiences. Your credit unions can differentiate itself and streamline a variety of loan processing by offering online lending solutions, as highlighted in our Digital Lending eGuide.