Sallie Mae, the financial services company known as a powerful player in the private student lending market, made a shift last year when it introduced a high-yield, online savings account and online certificates of deposit.
And last month, it announced further expansion of its retail banking business–a no-fee student checking account, which can be obtained through colleges and universities and used for direct disbursement of financial aid and tuition refunds.
Will potential credit union members be on the receiving end of these products? Maybe, say two credit union student loan vendor executives.
Sallie Mae's student checking account is not a traditional checking account. It's only available to students attending colleges and universities that elect to offer it and is intended to provide immediate access to financial aid and tuition refunds. But if students retain the accounts post-college, the product could potentially take away checking business from credit unions, said Michael Weber, vice president of marketing for Credit Union Student Choice, a service organization that provides private student lending products to about 180 credit unions.
"If you're a credit union in a university town, that could have an impact on the credit union's checking business," Weber said. "It's something to be aware of."
Weber pointed out that credit unions' share of the private student lending market is small. He estimates just several hundred credit unions actively participate.
Vince Passione, CEO of financial technology company Fynanz, which provides private student lending programs to more than 100 credit unions, said credit unions began originating private student loans around three years ago, mostly due to the rising costs of tuition, member demand for student loans and as a means of attracting Gen Y members.
And there are a number of credit unions that consider Sallie Mae a partner. More than 100 participate in its Smart Option Student Loan referral program, which allows them to refer members to loans that are underwritten, funded and serviced by Sallie Mae.
Passione said he thinks Sallie Mae's referral program participants should consider the fact that the members they refer to Sallie Mae could potentially sign up for the student checking account and use it long term.
"Once Sallie Mae has that client, why wouldn't they market their other products to them?" Passione said. "I think credit unions need to be careful."
Passione said on the other hand, he does not view Sallie Mae's online savings account and certificates of deposit as a threat to credit unions. These products follow an online model, are not full-service accounts and are similar to those offered by ING Direct.
"[The savings products] are not targeted to students, and they're using them to generate a deposit base," Passione said. "I don't see it as directly competing."
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
