Helping Members Navigate College Costs
College signals success, at least for those who graduate. Holding a bachelor’s degree is one of the best determinants of higher lifetime earnings, and college graduates are almost uniformly positive about the value of their degree: 98% of those making six figures and up say their degree has paid off, and even 63% of those making less than $50,000 agree (Pew Research Center 2014). Yet, financing college presents unavoidable challenges for millions of Americans. Obtaining a degree is more essential than ever to advancing in a post-industrial economy. Yet continuing cost growth increases the risk of a debt trap—when obligations exceed earnings growth and disrupt the savings linked to a middle-class lifestyle. Recent regulations, media attention, and economic concerns ensure continuing public attention to our college financing system.
This report highlights a high-impact opportunity for credit unions to empower members with tools and services for sound financial management. Research has shown that the framing of choices affects financial behavior; a raft of web resources is available to members. By propagating best-in-class resources, credit unions can help members make the best possible decisions about financing college.
The findings offer three main points:
- Credit unions have been a marginal segment in US student lending, which is dominated overwhelmingly by government loans (92%), followed by private loans (8%) made mostly by six for-profit institutions
- For those credit unions offering student loans, the most common method is to offer a website application link to a networked service organization, which offers technical support and possesses the capabilities to define the next generation of online finance navigators
- Given the economic, financial, and technological trends documented in this report, it makes sense for these credit unions to keep a toe in the water of private student lending—to offer personalized college financing services to member-borrowers that leverage third-party resources and navigators, enable financially sound decisions, and deliver high-value loan products
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