By the numbers: Why private student lending is poised for historic growth

For credit unions, the student lending market is entering a pivotal season shaped by a series of impactful numbers. Rising federal loan rates, changes to policy under the OBBB, record completion activity for the Free Application for Federal Student Aid (FAFSA), and growing college application trends are all pointing toward increased borrowing needs for the 2026–27 academic year—and a larger opportunity for credit unions to step up with responsible private student lending solutions.

Federal student loan rates are tied to the 10-year Treasury yield, which increased to 4.47% on May 12, up from 4.342% last year.

That increase is expected to push 2026–27 federal student loan rates even higher:

For many families, borrowing costs are now near the highest levels seen in more than a decade. Even small rate increases can significantly impact repayment costs over the life of a loan.

As federal rates climb, more borrowers are exploring private student loan options—especially credit union products that offer more competitive rates and personalized service.

At the same time, changes under the OBBB designed to lessen student loan debt will further increase reliance on private student lending.

Beginning July 1, Grad PLUS loans will be eliminated for new borrowers, ending the federal government’s long-standing practice of allowing graduate students to borrow up to the full cost of attendance. The law also introduces new borrowing caps for Parent PLUS caps of $20,000 annually and $65,000 total per student.

Parents were previously able to borrow up to the full cost of attendance minus other aid—and with the average cost of college hovering around $38,000 per year, the new caps will leave a significant funding gap.

According to the National College Attainment Network (NCAN), the high school class of 2026 reached a record 54.7% FAFSA completion rate as of May 1—the highest ever recorded at that point in the cycle.

That milestone matters because FAFSA completion strongly correlates with college enrollment and borrowing activity. NCAN finds that seniors who complete the FAFSA are 84% more likely to immediately enroll in postsecondary education.

The pipeline of prospective borrowers is expanding as well. Recent data from Common App showed a 5% increase year-over-year in total college applications via its platform through March 1, 2026. The average number of applications per applicant also increased slightly.

More students applying to more schools could translate into:

The 2026–27 lending cycle may become one of the most important student lending opportunities credit unions have seen in years.

This environment creates an important opportunity to deepen relationships with younger members and support families navigating rising education costs. As borrowers look for ways to fill funding gaps or manage repayment more effectively, credit unions are well positioned to grow both in-school lending and refinance activity while strengthening their role as trusted, member-focused alternatives to large national lenders.

With 18 years as a trusted CUSO, CU Student Choice is prepared to help credit unions meet this growing demand with customizable programs, including in-school and graduate lines of credit; student loan refinance; and new specialized programs for medical, law, and dental students. Contact us to learn more about launching a private student lending solution to meet your members’ needs.