For community-minded CUs, the loans' most important function may be helping families for whom scholarships, grants and federal loans are not enough to cover the actual cost of attending college, which has skyrocketed in recent years.

IH Mississippi Valley Credit Union of Moline, Ill., entered the private student lending arena "because we had a strong need within our community for student loans," said Laura Ernzen, vice president of marketing. "It became clear that the financial environment had shifted and with those changes, our members had fewer affordable options to fill the gap between government and school-based financial aid and the overall price of tuition."

With 47 being the average age of credit union members, another valuable aspect of private student loans is that they draw young people to the credit union and create a foundation for a lifelong relationship with Gen Y members.

"Member service is always our primary driver here at American Heritage and we recognize how important this loan program could be in our long-term relationship with our [young] members," said Bruce Foulke, CEO of the Philadelphia-based credit union. "Student loans to members will help us earn their continued patronage as they grow into their peak borrowing years."

Fynanz, the financial technology company that powers cuStudentLoans.org, a private student loan marketplace, has brought 4,000 new Gen Y members to its credit union partners over the past two lending seasons, according to Director of Marketing Christian Widhalm.

The company was founded in 2007 and the lending capacity of its platform is nearly $200 million. Fynanz's nationwide student lending network has 98 credit union partners, 78 of whom offer EdAccess, its turnkey private student loan program, and 20 of whom have custom-built programs. CU Student Lending, a CUSO formed in June of 2010, manages the EdAccess loans.

Fynanz added a financial literacy component to its offerings last month, when it announced the release of a program to syndicate its College Resource Center to all of its credit union partners. By including a small snippet of code on their websites, credit unions can host dynamic, automatically updated content designed to help students navigate the financing process.

"If you give them good advice, a loan is more than a product, it's a solution that will help the student in the future," said Ken O'Connor, director of student advocacy at cuStudentloans.org.

Another CUSO offering turnkey private student lending is Credit Union Student Choice, led by Jon Jeffreys, vice president of Callahan & Associates subsidiary Callahan Financial Services. Student Choice has about 175 credit union clients and has originated $400 million in loans since May 2008.

In November, the CUSO announced plans to roll out a private consolidation loan program to all of its clients in 2011. The PCON program was beta tested by Eli Lilly FCU of Indianapolis because the credit union "wanted to add yet another layer of member value to our existing offering of Student Choice products," explained Terri Polk, lending systems administrator. "The PCON fits the bill by allowing our graduates to economically consolidate multiple private student loans into one convenient monthly payment."

"The PCON beta testing has been a smooth process," she added. "As always, the CU Student Choice team is quick to respond to any issues that arise."

CU Campus Resources, launched in summer 2010, is a CUSO offering customized private student loan services. It currently has two credit union partners and hopes to end 2011 with about six clients and 15,000 loan applications, according to Executive Vice President and Chief Operating Officer Mike Long.

"Our CUSO business plan is very different from the other credit union solutions in the marketplace," Long said. "For those credit unions that envision originating significant application volumes we offer a contribution rewards system which returns fees paid in proportion to the overall volume of CU Campus Resources. The system is scalable, in that the more volume CU Campus Resources generates, the more economical it gets for everyone."

Another option for CUs looking to offer private student loans is to partner with Education Loan Source, an education finance company that offers Custom Loan Source, a branded student loan funding program. One of ELS' strengths, according to CEO Ronda Perks, is the expertise of its staff; the executive team has an average tenure of 15 years in the education finance industry. "ELS helps credit unions understand how to infiltrate schools, which is great for credit unions because families ask and trust schools about financial aid resources," Perks said.

ELS client DEXSTA Credit Union of Wilmington, Del., has seen the fruit of that expertise. Michael Reilly, loan services manager at the credit union, said ELS and its business partner, Cology, a core processing provider, got DEXSTA's logo and a link to the CU's website on the private loan page of Wilmington University's financial aid website.

Reilly is sanguine about DEXSTA's private student lending prospects for 2011. Since the inception of the program in June, the $177 million credit union has made 16 funded loans totaling $158,000 and another 17 pending disbursement that total $118,000. Reilly said DEXSTA's goal for this year is $500,000 in funded loans.