Should Policy be Used to Abate Student Lending Woes?

A combination of economic factors is driving the current student lending trends of historically high balances and record levels of delinquencies: the wave of unemployed or underemployed that are enrolling or returning to universities to gain additional training and more marketable degrees; high tuition costs require many students to secure multiple loans to cover college expenses; and graduating students with outstanding loans are entering a weak labor market, limiting their ability to repay – leading to higher numbers of loan defaults.

Credit unions that have a relationship with a member from an early age through a checking or savings account have the benefit of insight into how that member manages his or her money. Extending that relationship, credit unions can take additional steps to ensure healthy loan performance by counseling members with student loan debt on how to best manage their credit, providing financial management training and establishing the institution as a knowledgeable resource. All of these steps create opportunities to provide further financial support for the next phase of the member’s life.