PEWAUKEE, WI (June 24, 2013) Federal student loan rates are set to jump from 3.4% to 6.8% if Congress doesn't intervene by July 1. That interest rate hike won’t affect those who financed their education through not-for-profit credit unions. Those who see their rates increase should consider contacting a credit union for advice on how to limit the impact or to possibly refinance their debts.
"Credit unions are financial cooperatives owned and operated for the benefit of their depositors, which includes students," said Wisconsin Credit Union League President Brett Thompson. "Many credit unions offer private student loans because students deserve reasonable rates as well as an institution that will work with them to manage their short and long-term finances."
While Wisconsin credit unions hold just a tiny slice of all student loans, the amount they hold rose almost 27% in 2013 to more than $147 million. Prudent underwriting and financial guidance to borrowers helps credit unions' private student loans perform better than other student loans with a far lower default rate—around 1.6% compared to less than 6% for all private student loans and more than 12% for federal loans.
Today, nearly half of U.S. high school seniors can't even guess how much money they need for college and even greater numbers don't understand the basic terms of a student loan, according to a survey by the Credit Union National Association.
To help consumers become more financially literate, Wisconsin credit unions provided more than 30,000 hours of free financial counseling to consumers and refinanced loans that saved state residents $134 million in 2012. Credit unions also use "reality fairs" and the online life simulation, Money Mission®, to engage high school students across the country in financial decision-making. The simulations stress the importance of higher education and highlight the budgeting challenges graduates face that are compounded by various sources of debt. Read more at www.theleague.coop/scorecard.
Students and their families who are concerned with the potential impact of the increase in federal student loan rate hikes can find a credit union at www.aSmarterChoice.org.