The Obama administrations plan to replace the Federal Family Education Loan Program with direct student lending got one step closer to becoming a reality with the House voting on and passing the measure. Credit union student lenders that are part of FFELP are not panicking.Clarissa Rodriguez, communications analyst at Security Service Federal Credit Union in San Antonio, said that the credit union will continue FFELP until it is dismantled and will focus on a referral program with Sallie Mae in FFELP's absence."We'll be really sad to see it go. We've been doing the program for a very long time for our members, but we will still do our best to meet the educational goals of our members after the program goes."Rodriguez said the credit union has developed a good relationship with Sallie Mae over the years and will continue to build on that relationship with a referral program that will direct members to apply for private loans through Sallie Mae if FFELP is eliminated.Silver Sword Capital Partners, a sales and marketing firm that helps banks and credit unions set up student loan referral programs, said that it has seen an increase in business over the past few months as credit union federal lenders look at other options.Recently, Silver Sword closed a deal with Members United Corporate Federal Credit Union where Members United will offer the option to its 2,100 natural person credit unions to refer members to Sallie Mae's private Smart Option Student Loan.Mike Mullowney, managing partner at Silver Sword, said that the credit unions are basically just referring members to the Sallie Mae loan product through a link to a co-branded application."Many credit unions still want to learn more about student lending. This is a way to test it out and learn, and eventually, they can get to a point where they want to lend their own money," Mullowney said on why some credit unions are choosing to go the referral route.For those that are FFELP lenders, Mullowney said he's had credit unions reaching out to him asking for help because they still want to be able to offer loans to members. Over the next few months, he said that he expects to continue to see a growing interest in student loan referral products among credit unions."A lot of credit unions very much want to offer a product. Over the next few months I think we will have a lot of credit unions offering one of our products. It's a very exciting time for us."Purdue Employees Federal Credit Union was the sole FFELP lender for Purdue University when, a year and half ago, the university decided to move to a direct lending program."Our program got eliminated a year ago, so the legislation won't really impact us," said Brian Musser, chief financial officer at Purdue Employees.Musser said that last year the CU looked at developing a private student loan product, but decided to put that on hold and instead started a referral program with Sallie Mae.Even though a referral program is what it has in place at the moment, Musser added that the CU has not completely ruled out a private loan product."Private student lending is the direction that we're going to go in. We're looking to re-address developing a product next spring."Jon Jeffreys, president of CU Student Choice, said that he has also seen business spike in the last few months and has even had to hire a new sales person to handle inbound traffic from credit unions."With student lending getting so many negative headlines, its only natural credit unions are going to re-evaluate the federal space and see if there is something better out there," Jeffreys said.Jeffreys compared the FFELP legislation to a vendor contract. If a vendor doesn't renew a contract with a credit union, he said, it's logical that the credit union will go out and see how the market has changed and what new products and services are out there.The federal loan program, Jeffreys said, is like a three-ring binder filled with rules and procedures you follow and then get a loan. Two years ago the economics of the program changed and made it hard for credit unions to offer borrower benefits and compete on the product, he said.Mike Long, chief credit officer at UW Credit Union, said that while it won't come near to making up the gap that will be left by the elimination of FFELP, the credit union will shift focus from federal to private student loans.The credit union already has an active private student loan product in place that they will focus on expanding. Out of the $130 million total in student loans originationed this lending season, Long said $110 million was from FFELP and the rest were private loans."It's like asking a credit union auto lending what they're going to do if the government takes over auto loans," Long said.He added that the credit union won't take on more risk with its private student loan program, but it will look to offer the product to students outside the University of Wisconsin. UW Credit Union will also look at developing a private graduate school loan and a private loan consolidation product.The credit union has one employee that is responsible for coordinating student loans, so Long said not having the FFELP loan volume won't have an internal impact on the credit union, that employee will just shift focus to expanding the private student loan program.–[email protected]