The current administration has proposed numerous changes to the U.S. Department of Education, including shifting the responsibility for federal student loans to the Small Business Administration (SBA). In addition, there has been increasing chatter about reining in Parent PLUS and Grad PLUS loans, which are used by millions of parents and graduate students to fill college funding gaps. While no one knows exactly what changes are in store on the federal loan front, it is increasingly likely that the federal government will play a smaller role in education financing moving forward, creating a sizable demand for private education financing solutions.
Currently, federal student loan debt represents 92.2% of all student loan debt with private loans accounting for just 7.79%, including $29.3 billion in refinance loans, according to the Education Data Initiative (EDI).
Meanwhile, 19.28 million undergraduate students were enrolled in college in fall 2024 with projections of 19.57 million for fall 2025. In short, the demand for college financing is expected to remain strong—meaning that any changes to federal student aid, and/or continued uncertainty that shift consumer preference, could have a big impact on private student lenders.
Echoes of the not-too-distant past
During the Great Recession, for-profit student lenders were pulling back in major ways as many relied on the securitization markets for the loans they were originating. At the time, those markets were dislocated, driving up the cost of student loans for consumers. Some larger lenders exited the business entirely and haven’t returned, leaving families with fewer financing options.
This was the impetus for several of the nation’s leading credit unions and CUSOs to come together in 2008 with a goal of helping members responsibly overcome the increasing costs of higher education. As a result of these efforts, a new collaborative organization was born.
Challenging times are when credit unions tend to step up and do what they do best. This collaborative business model enabled credit unions to help members with one of their most pressing financial needs, and dozens of credit unions joined in the effort to offer fair-value private lending solutions.
Opportunities to fill future voids
Today, credit unions may be on the precipice of yet another opportunity to be part of the solution and fill the potential vacuum changes in federal student lending could present.
As uncertainty continues around federal student loans, how families are going to pay for college is an issue that is keeping parents up at night.
Private student loans were designed to fill the gap that is left behind after a family’s savings, scholarships and federal financial aid have been exhausted. Based on our 17 years of data, prudently underwritten, fair-value private student loans have also proven to be a solid asset in terms of financial performance.
As we look ahead, it’s clear that cooperatives as an industry may have an even bigger opportunity to provide much-needed student lending solutions—and peace of mind—for members. It’s a critical moment for cooperatives to be there for their members, whether they are parents or students themselves.
This is why credit unions exist—to effectively serve members’ financial needs. And, as not-for-profit cooperatives, our industry has the ability to be there for members when they need us most.
Flexible solutions that are easy to implement
CU Student Choice offers one-of-a-kind solutions, such as a private education line of credit that offers tremendous convenience to borrowers and is truly unique in the marketplace. This solution can greatly ease the stress of one of the biggest financial milestones your members will experience. With no implementation fees or need for additional credit union staffing, the Student Choice student lending program offers a low lift for a high return.
Contact us to learn more about how Student Choice can make it simple to offer customized student lending solutions that benefit your current and future members.
