For many credit unions, private student lending remains a mysterious, and often misunderstood, lending category. While offering a student loan program can seem risky or complex, the reality witnessed by hundreds of credit unions nationwide proves otherwise. By separating myth from reality, credit unions can better understand how to serve members, diversify portfolios, and create long-term relationships with the next generation of credit union members.
Myth #1: Student loans are risky and unpredictable
It’s a common belief that student loans are more likely to default than other types of consumer lending. While headlines about the “student debt crisis” (typically focused on the much-maligned federal student loan program) have likely fueled this perception, the actual numbers tell a much different story.
Reality: With more than 17 years of seasoning, credit unions originating student loans via Student Choice have experienced strong and stable performance, with annual gross charge-off rates of less than 1.5%.
The key to strong performance is sensible, disciplined underwriting that includes:
- Risk-based pricing with minimum credit score requirements and criteria that strongly encourage a co-borrower.
- School certification to verify student enrollment, validate the loan amount does not exceed financial need, and ensure the student is meeting educational requirements—a process that culminates with the disbursement of the loan directly to the school.
- Restricting loans to students who are attending public and private non-profit schools with a proven history of low student loan defaults.
Myth #2: Private student loans don’t provide enough return to the bottom line.
Student loans not only deliver a strong return, but they also open the door to important relationships with the next generation of members.
Reality:With the strong repayment trends described above, credit unions, on average, have also been able to recognize a very sustainable return (~2.5% ROA) that is on par or better than many other asset classes.
And with an average repayment duration of 10 years, these loans deliver strong value over an extended period of time, something that will yield even more value if/when rates drop in future years.
These loans also give credit unions the perfect solution to connect with young adults and establish a genuine opportunity for long-term member relationships. According to research conducted by Filene, in reviewing data from actual Student Choice partner credit unions, members with a credit union private student loan are highly productive. In fact, members aged 31 to 37 with a PSL have a 5% higher credit card penetration and are almost twice as likely to have a mortgage at the credit union than those without.
Myth #3: It’s difficult to deploy a student lending program.
Building a student loan program from scratch may sound daunting: new products, staff training, compliance considerations, and marketing all take time and resources.
Reality: An experienced CUSO partner like Student Choice can have your program up and running in 30 to 45 days—with no need to hire additional staff.
From establishing program parameters to technical and marketing support, the overall impact to your credit union’s operations is minimal. And that support continues throughout the partnership in the form of audit support, pricing discussions, staff training, and free marketing and educational resources.
A solution rooted in reality
As the federal student loan environment shifts in 2026 under the One Big Beautiful Bill Act, the need for stable, responsible student lending solutions from credit unions will be more critical than ever—especially for graduate students facing the elimination of Grad PLUS loans.
Contact us to learn more about how Student Choice can make it simple to offer profitable student lending solutions that benefit your current and future members.
