Tuition costs: How can your credit union help your members?

Total student debt in this country now surpasses $1 trillion and is growing every day. For many families, the “American dream” of a college education now translates into long-term debt and financial hardship. Even state schools are asking students to shoulder more of the financial burden than ever before.

According to the Institute for College Access and Success’s report ‘Quick Facts about Student Debt’ published in March of 2014:

• Average debt levels for all graduating seniors with student loans rose to $29,400 in 2012 a 25% increase from $23,450 in 2008.
• At public colleges, average debt was $25,550 25% higher than in 2008, when the average was $20,450.
• At private nonprofit colleges, average debt was $32,300 15% higher than in 2008, when the average was $28,200.
• At for-profit colleges, average debt was $39,950 26% higher than in 2008, when the average was $31,800

Is it any surprise that the numbers are increasing? With the recession of 2008 hitting so many, these are worrisome figures. Many of those affected include professionals who might otherwise have been able to help defray these costs. Students are strapped with debt before they even get out into the world: and a hefty debt at that. Is it fair to turn out students whose initial concern after graduation is how can they repay the monumental debt that they accrued in college? What are the job placement prospects to alleviate the concern of paying off these loans?

WHAT ARE THE STANDARD OPTIONS? 

For most students, financial aid usually is accomplished through these traditional means:

FAFSA (Free Application for Federal Student Aid) is supposed to be easy but can be daunting for the first time applier. There are many requirements that need to be in place to include the latest tax return but using last year’s return for projecting parent’s/student’s income would do to get going. www. Fafsa.gov is where to go. How much you’ll get can be estimated by what’s called the FAFSA4caster which is a calculator that will ballpark your estimate of Federal Student Aid. You must use the FAFSA application to apply once you’ve decided on at least one school for admission.

Stafford Loans, government loans, offer subsidized and unsubsidized loans, which range from $8,500 to $12,000 per year depending on which type you chose. The interest rates are currently projected at 4.66%, which accrues while the student is in school.

The Pell Grant is available for undergraduates and doesn’t have to be repaid but is capped at $5,730 for 2014-2015 school year and $5,775 for the 2015-2016 school year, depending on need.

This seems clear and straightforward, right? On the DOE’s website, it states that “your school determines the amount you can borrow, and the amount may not exceed your financial need.” Understood. However, the approved amount isn’t going to cover the additional expenses. The need is there. So, where does the rest of the money come from then?

A CREDIT UNION-FRIENDLY CONCEPT

We have come across a program called Lower Your Tuition that provides tuition savings for credit union members. If credit unions are truly concerned about their members and are looking to provide actual member benefits, this program offers the ability to do just that. The system works like this:

• A network of 340 colleges and universities across the United States are eager to attract more students to their institutions. These are good schools — 80% of the schools are on the U.S. News & World Report list of America’s best colleges, and these schools have additional openings to fill and are looking for additional qualified students.

• The colleges have authorized this program to work with partners and to offer them a free branded $750 tuition discount scholarship valid at all 340 schools. The only requirement is that the student be accepted on standard admission criteria (just like any other student) to be able to utilize their tuition savings.

• Marketing content is provided for partners to distribute to their members, featuring a free $750 scholarship at no cost to the credit union or to their member.

• When a member receives the free scholarship, they are also provided information on how to save up to a full year’s tuition for their children, by enrolling in the Lower Your Tuition membership program. The initial $750 tuition discount is free and theirs to keep with no obligation; membership is just $12.95 per month.

• The membership includes multiple benefits to help families save for college. New members receive $1000 in tuition discounts just for joining, plus $250 more in tuition discounts every single month.

• After one year, a member will have accrued $4000 in tuition discounts plus the initial $750 in tuition discounts they received as a free gift. A family joining the program when a child enters ninth-grade will have $10,750 in tuition savings. A family that joins when their child is in kindergarten will have $37,750 in tuition savings — they can save up to one full year’s tuition and any remaining balance can be reassigned to siblings, cousins, nieces, nephews, stepchildren, godchildren, and even grandchildren.

• A portion of the dues is credited back to the credit union as fee income.

WHAT DOES THE FUTURE HOLD?

In his State of the Union address, President Obama proposed eliminating some of the tax benefits of the 529 college tuition plans. This idea was met with strenuous objection by not only Republicans but also Democrats and the plan was quickly tabled.   But it highlighted an issue that will continue to grow – how do we pay for that college degree that is so highly respected by employers? Once again, credit unions can be the leaders in an area often left behind by the banking industry – we can help our members help themselves.