Local Government Credit Union

Credit union's student lending to 'help fill gap'

CHAMPAIGN — The University of Illinois Employees Credit Union will re-enter the world of student lending — with help from a Wisconsin company that has been in the business a long time.

Beginning Thursday, the credit union will offer private student loans to students attending any University of Illinois campus.

Private student loans are used by students and families who have exhausted their federal student loan packages, but still need money for school expenses.

"Making college more accessible for University of Illinois students is something the credit union feels very strongly about," said Greg Anderson, senior vice president and chief operating officer of the credit union.

"The private student loans we can offer through this partnership with CU Campus Resources will help the credit union fill the gap in financial needs for that education," he said.

CU Campus Resources, a Madison, Wis.-based company that is wholly owned by the UW Credit Union there, provides private education loan products and services that participating credit unions — like the UI Employees Credit Union — can make available to members.

The UW Credit Union has been active in student lending for more than 40 years. It has an education loan portfolio of about $400 million.

Anderson said students can borrow up to $12,500 per school year from the credit union, with a maximum of $40,000 per borrower.

They can make interest-only payments from the start; make regular payments on principal and interest from the start; or defer their first payment until six months after graduation, he said.

Normally, such loans have a 12- to 15-year repayment schedule.

The credit union requires a $50 minimum payment and has no pre-payment penalty, he added.

Anderson said the credit union will initially limit student lending to 5 percent of the credit union's assets. He said the credit union eventually hopes to expand the lending program to students attending other colleges and universities.

Anderson said the UI Employees Credit Union had "a very strong student loan program in the '80s and early '90s."

But when the federal government moved to direct lending, rather than guaranteed lending, in 1996, the credit union got out of the student-loan origination business.

As the costs of education continued to escalate, the credit union saw a need to return to the student-loan business.

Keith Leggett's Credit Union Watch: CU Exposure to State and Local ...

While the risk from local government debt to the National Credit Union Share Insurance Fund appears to be minimal at this time, there are some credit unions that have significant exposure to state and local government debt. Seven credit unions report that their exposures to state and local governments exceed their net worth, including to $4 billion-plus credit unions (Bethpage and Alaska USA). Dr. Keith Leggett is a Vice President & Senior Economist at the American Bankers Association. Prior to joining the ABA, Dr. Leggett was an Associate Professor of Economics at Davis & Elkins College. Dr. Leggett’s responsibilities include analyzing the structure and performance of the financial services industry and monitoring conditions in the macro-economy and credit markets. Dr. Leggett received his Ph.D. from Georgia State University in economics and undergraduate degree from Mars Hill College.

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