The Consumer Financial Protection Bureau (CFPB) on June 14 announced a settlement with Student CU Connect CUSO, LLC (CUSO), a company set up to hold and manage private loans for students at ITT Technical Institute.
Student CU Connect CUSO is headquartered in Overland Park, Kansas.
In a complaint, the CFPB alleged that the CUSO provided substantial assistance to ITT Educational Services, Inc. in engaging in unfair acts and practices.
Under the terms of the proposed stipulated judgment, CUSO must stop collecting on all outstanding CUSO loans, discharge all outstanding CUSO loans, and ask all consumer reporting agencies to which CUSO furnished information to delete tradelines relating to CUSO loans. The order also requires CUSO to provide notice to all consumers with outstanding CUSO loans that their debt has been discharged and is no longer owed and that CUSO is seeking to have the relevant tradelines deleted. The total amount of loan forgiveness is currently estimated to be $168 million.
Forty-four states plus the District of Columbia have also settled with CUSO today on the same terms.
Read the complaint.
Read the settlement.
Showing posts with label Student Loans. Show all posts
Showing posts with label Student Loans. Show all posts
Friday, June 14, 2019
Sunday, June 9, 2019
CU Organizations Agree to Pay $7.5 Million to Settle ITT Student Loan Nightmare
Credit union organizations agreed to a motion to settle claims with ITT Technical Institute bankruptcy trustee.
As part of the settlement agreement, credit union organizations will pay almost $7.5 million.
The credit union organizations covered by the motion include Student CU Connect CUSO, LLC, The Rochdale Group, Inc., Elements Financial Federal Credit Union (formerly known as Eli Lilly Federal Credit Union), Bellco Credit Union, Credit Union of America, Directions Credit Union, Veridian Credit Union, Workers Credit Union and CommunityAmerica Credit Union.
Also, Student CU Connect CUSO will have an allowed general unsecured claim in the amount of $127,844,857, which constitutes a 15 percent reduction of the amount claimed by the CUSO.
Read the motion.
Read the Indianapolis Business Journal article.
As part of the settlement agreement, credit union organizations will pay almost $7.5 million.
The credit union organizations covered by the motion include Student CU Connect CUSO, LLC, The Rochdale Group, Inc., Elements Financial Federal Credit Union (formerly known as Eli Lilly Federal Credit Union), Bellco Credit Union, Credit Union of America, Directions Credit Union, Veridian Credit Union, Workers Credit Union and CommunityAmerica Credit Union.
Also, Student CU Connect CUSO will have an allowed general unsecured claim in the amount of $127,844,857, which constitutes a 15 percent reduction of the amount claimed by the CUSO.
Read the motion.
Read the Indianapolis Business Journal article.
Monday, September 17, 2018
Paper Examines Private Student Loans at CUs
A paper recently published in the Review of Quantitative Finance and Accounting examined credit unions' entrance into the private student loan market and exposure to private student loans between 2011 and 2015.
Credit unions, unlike banks, have been required by the National Credit Union Administration to report their holdings of private student loans, since 2011.
According to the paper, private student loans have been the fastest growing loan category among credit unions, expanding from $1.03 billion at the end of March 2011 to $3.53 billion at year-end 2015.
The paper found competition with other depository institutions, strong loan demand, educational field of membership, and proximity to campus were all driving forces behind credit unions having more exposure to private student loans.
Here are some of the other findings from the paper.
Credit unions, unlike banks, have been required by the National Credit Union Administration to report their holdings of private student loans, since 2011.
According to the paper, private student loans have been the fastest growing loan category among credit unions, expanding from $1.03 billion at the end of March 2011 to $3.53 billion at year-end 2015.
The paper found competition with other depository institutions, strong loan demand, educational field of membership, and proximity to campus were all driving forces behind credit unions having more exposure to private student loans.
Here are some of the other findings from the paper.
- There is a positive relationship between the holding of long-term rate sensitive assets and private student loans. The author posits that private student loans typical have variable interest rates. By increasing their holdings in private student loans, credit unions will reduce their interest rate risk.
- Credit unions with a higher loans-to-deposits (shares) ratio were more likely to be involved in private student loans.
- Lower capitalized credit unions were more likely to be exposed to private student loans.
- As credit unions get larger, they are more likely to have a greater concentration in private student loans.
- Private student loans have a negative and statistically significant effect on a credit union’s return on assets. The paper argues that credit unions that entered the private student loan market had higher non-interest expense, as they added staff and resources to originate and service these new asset class.
- Concentration in private student loans did not affect risk at credit unions. However, this may be due to student loans still being in deferral and not yet seasoned.
- Many credit unions that entered the private student loan market did so through participation loans. However, as participation loans make up a greater share of private student loans, there is an increase in delinquency rates.
Monday, October 30, 2017
Non-Federally Guaranteed Student Loans Up 12.1 Percent Year-over-Year
Federally-insured credit unions reported almost $4.1 billion in outstanding non-federally guaranteed student loans as of June 30, 2017. This is up 12.1 percent from a year ago.
According to data from the National Credit Union Administration's website, approximately $1.1 billion in non-federally guaranteed student loans were in deferred status as of the second quarter 2017.
Navy Federal Credit Union had the largest amount of non-federally guaranteed student loans at almost $213 million. Below is a table listing the 10 largest student lending credit unions (click on image to enlarge).
As of June 30, 2017, $44.3 million of these student loans were 60 days or more past due. The delinquency rate on these loans were 1.09 percent, down 10 basis points from a year earlier.
However, the reported delinquency rate includes loans in deferred status and thereby understates the true delinquency rate.
In addition, credit unions reported $8.9 million in net charged off student loans as of June 2017. This is more than double the amount of net charge-offs from a year ago, which was $4.2 million.
Over the course of the last year, the net charge-off rate on non-federally guaranteed student loans increased by 22 basis points to 0.45 percent.
Still, private student loans at credit unions outperform federally guaranteed student loans, which have a delinquency (90 days past due) and default rate of 11.2 percent.
According to data from the National Credit Union Administration's website, approximately $1.1 billion in non-federally guaranteed student loans were in deferred status as of the second quarter 2017.
Navy Federal Credit Union had the largest amount of non-federally guaranteed student loans at almost $213 million. Below is a table listing the 10 largest student lending credit unions (click on image to enlarge).
As of June 30, 2017, $44.3 million of these student loans were 60 days or more past due. The delinquency rate on these loans were 1.09 percent, down 10 basis points from a year earlier.
However, the reported delinquency rate includes loans in deferred status and thereby understates the true delinquency rate.
In addition, credit unions reported $8.9 million in net charged off student loans as of June 2017. This is more than double the amount of net charge-offs from a year ago, which was $4.2 million.
Over the course of the last year, the net charge-off rate on non-federally guaranteed student loans increased by 22 basis points to 0.45 percent.
Still, private student loans at credit unions outperform federally guaranteed student loans, which have a delinquency (90 days past due) and default rate of 11.2 percent.
Monday, August 10, 2015
Third Party Vendors Remain a Regulatory Blind Spot
In an August 6 letter to nine consumer groups that requested that National Credit Union Administration (NCUA) investigate credit unions and credit union service organizations that participated in predatory student loans with ITT Educational Services, NCUA Chairman Matz wrote that NCUA does not have enforcement authority over credit union service organizations or third party vendors. (See the following blog post here)
As background, 7 credit unions purchased loans from ITT Education Services, the Rochdale Group, and Student CU Connect. A majority these loans ended in default. The seven credit unions that had participated in a lending program ceased purchasing these loans in 2012 after a three-year contract expired at NCUA's instigation.
This inability of NCUA to examine third party vendors remains a regulatory blind spot. As this letter to the nine consumer groups highlights, third party vendors pose a potential risk to credit unions.
While NCUA is seeking authority to supervise third party vendors, the Credit Union National Association (CUNA) is actively opposing this authority.
The latest example of CUNA's opposition is an August 5 letter to Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Harry Reid (D-NV) opposing an amendment introduced by Senator Warren to the Cybersecurity Information Sharing Act (CISA), which would grant NCUA additional authority to supervise third party vendors. The Warren amendment was not included in the list of amendments that will be debated by the Senate, when it considers CISA.
The failure to include this amendment maintains a regulatory blind spot regarding third party vendors that solely serve credit unions.
Perhaps the Consumer Financial Protection Bureau should step in, where NCUA cannot, to fill this regulatory void and begin to examine these third party vendors to credit unions.
As background, 7 credit unions purchased loans from ITT Education Services, the Rochdale Group, and Student CU Connect. A majority these loans ended in default. The seven credit unions that had participated in a lending program ceased purchasing these loans in 2012 after a three-year contract expired at NCUA's instigation.
This inability of NCUA to examine third party vendors remains a regulatory blind spot. As this letter to the nine consumer groups highlights, third party vendors pose a potential risk to credit unions.
While NCUA is seeking authority to supervise third party vendors, the Credit Union National Association (CUNA) is actively opposing this authority.
The latest example of CUNA's opposition is an August 5 letter to Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Harry Reid (D-NV) opposing an amendment introduced by Senator Warren to the Cybersecurity Information Sharing Act (CISA), which would grant NCUA additional authority to supervise third party vendors. The Warren amendment was not included in the list of amendments that will be debated by the Senate, when it considers CISA.
The failure to include this amendment maintains a regulatory blind spot regarding third party vendors that solely serve credit unions.
Perhaps the Consumer Financial Protection Bureau should step in, where NCUA cannot, to fill this regulatory void and begin to examine these third party vendors to credit unions.
Wednesday, June 11, 2014
Taxpayer Subsidized Business School Loans for International Students
Some credit unions are providing taxpayer subsidized student loans to international students to attend prestigious business schools in the United States.
At least, four credit unions are participating with graduate business school programs in offering these private student loans to international students.
Quorum FCU (Purchase, NY) is participating in a student loan program for international students seeking an MBA from either the University of Pennsylvania's Wharton School or Cornell's Johnson Graduate School of Management.
Anderson School of Management at UCLA has partnered with Eli Lilly Credit Union (Indianapolis, IN) to provide loans up to $85000 to international students without needing a cosigner.
Kenan-Flagler School at UNC will permit students to borrow from Coastal Federal Credit Union (Raleigh, NC) without a cosigner. The loan amount is limited to a maximum amount of $45,000 per year. Coastal FCU has also partnered with Duke's Fuqua School of Business.
Stanford University's Graduate School of Business has partnered with the Star One Credit Union (Sunnyvale, CA) to provide loans to international business students.
But should the credit union tax subsidy go to fund loans for international students attending graduate business schools in the United States?
It also appears that these credit unions are using gimmicks to qualify these international students for credit union membership.
At least, four credit unions are participating with graduate business school programs in offering these private student loans to international students.
Quorum FCU (Purchase, NY) is participating in a student loan program for international students seeking an MBA from either the University of Pennsylvania's Wharton School or Cornell's Johnson Graduate School of Management.
Anderson School of Management at UCLA has partnered with Eli Lilly Credit Union (Indianapolis, IN) to provide loans up to $85000 to international students without needing a cosigner.
Kenan-Flagler School at UNC will permit students to borrow from Coastal Federal Credit Union (Raleigh, NC) without a cosigner. The loan amount is limited to a maximum amount of $45,000 per year. Coastal FCU has also partnered with Duke's Fuqua School of Business.
Stanford University's Graduate School of Business has partnered with the Star One Credit Union (Sunnyvale, CA) to provide loans to international business students.
But should the credit union tax subsidy go to fund loans for international students attending graduate business schools in the United States?
It also appears that these credit unions are using gimmicks to qualify these international students for credit union membership.
Tuesday, May 13, 2014
Performance of CU ITT Student Loans
The following tables provide information on the performance of private student loans at seven credit unions that participated in ITT's Student CU Connect program.
The seven credit unions that participated in ITT's Student CU Connect private student loan program were Eli Lilly Federal Credit Union, in Indianapolis, Ind.; Bellco Credit Union, in Greenwood Village, Colo.; CommunityAmerica Credit Union, Lenexa, Kan.; Workers’ Credit Union, Fitchburg, Mass.; Directions Credit Union, Toledo, Ohio; Veridian Credit Union, Waterloo, Iowa; and Credit Union of America, Wichita, Kan.
The first table looks at the dollar amount of outstanding private student loans at the seven credit unions between 2011 and 2013. The National Credit Union Administration only started to collect this information from credit unions beginning in 2011. Not all the student loans are part of the ITT Student CU Connect program; however I suspect the bulk of the delinquencies and net charge-offs are associated with the program.
The next table reports on the net charge-offs of non-federally guaranteed student loans. These seven credit union reported cumulative net charge-offs of over $40.4 million on private student loans between 2011 and the end of 2013.
The last table reports on the dollar volume and number of delinquent private student loans at these seven credit unions. For example, in 2013, these seven credit unions reported 16,672 private student loans worth almost $18.5 million were at least 60 days past due.
The seven credit unions that participated in ITT's Student CU Connect private student loan program were Eli Lilly Federal Credit Union, in Indianapolis, Ind.; Bellco Credit Union, in Greenwood Village, Colo.; CommunityAmerica Credit Union, Lenexa, Kan.; Workers’ Credit Union, Fitchburg, Mass.; Directions Credit Union, Toledo, Ohio; Veridian Credit Union, Waterloo, Iowa; and Credit Union of America, Wichita, Kan.
The first table looks at the dollar amount of outstanding private student loans at the seven credit unions between 2011 and 2013. The National Credit Union Administration only started to collect this information from credit unions beginning in 2011. Not all the student loans are part of the ITT Student CU Connect program; however I suspect the bulk of the delinquencies and net charge-offs are associated with the program.
The next table reports on the net charge-offs of non-federally guaranteed student loans. These seven credit union reported cumulative net charge-offs of over $40.4 million on private student loans between 2011 and the end of 2013.
The last table reports on the dollar volume and number of delinquent private student loans at these seven credit unions. For example, in 2013, these seven credit unions reported 16,672 private student loans worth almost $18.5 million were at least 60 days past due.
Friday, May 2, 2014
More on Eli Lilly FCU and ITT Private Student Loans
According to the Indianapolis Business Journal, Eli Lilly FCU had to restate its 2012 financials after it recorded a $26 million loan loss provision at the end of 2012, when it reserved “70 percent of total loan balances for a specific Private Student Loan program.”
As a result of this loan loss provisioning, Eli Lilly FCU went from a previously reported 2012 profit of $8.9 million for 2012 to a $13.9 million net loss in 2012. The net worth for the credit union fell from 9.82 percent in 2011 to 8.24 percent in 2012.
Mike Renninger, principal of Carmel financial consultancy Renninger & Associates, commenting on the losses from the ITT student loan program said: “Somebody ought to have massive egg on their face for doing this.”
Read the story.
As a result of this loan loss provisioning, Eli Lilly FCU went from a previously reported 2012 profit of $8.9 million for 2012 to a $13.9 million net loss in 2012. The net worth for the credit union fell from 9.82 percent in 2011 to 8.24 percent in 2012.
Mike Renninger, principal of Carmel financial consultancy Renninger & Associates, commenting on the losses from the ITT student loan program said: “Somebody ought to have massive egg on their face for doing this.”
Read the story.
Thursday, May 1, 2014
Lawsuit Links CUs to Predatory Loan Practices at ITT Educational Services
A lawsuit by the Consumer Financial Protection Bureau (CFPB) against ITT Educational Services (ITT) links a student loan credit union service organization (CUSO), Student CU Connect, and indirectly credit unions to a predatory private student loan program.
Seven credit unions founded Student CU Connect (SCUC) -- Eli Lilly Federal Credit Union in Indianapolis, Ind.; Bellco Credit Union in Greenwood Village, Colo.; CommunityAmerica Credit Union in Lenexa, Kan.; Workers’ Credit Union in Fitchburg, Mass.; Directions Credit Union in Toledo, Ohio; Veridian Credit Union in Waterloo, Iowa; and Credit Union of America in Wichita, Kan. (check out the November 5, 2009 press release).
Eli Lilly Federal Credit Union was the originating entity of the student loan participations. (I will note that Eli Lilly FCU has ended this loan program with ITT). Participating credit unions made a three year commitment to fund a pre-specified amount of student loans each quarter.
The press release for SCUC makes it clear that this program was a good source of revenues for credit unions.
Paragraphs 120 through 128 of the CFPB complaint describe the SCUC private loan program (link to the complaint can be found at the end of this commentary).
The complaint notes that from March 2009 until December 2011 SCUC originated $189 million in student loans to ITT students. SCUC was only available to ITT students.
Paragraph 121 discusses the connection amongst ITT, SCUC, and the lead credit union, Eli Lilly FCU.
Paragraphs 123 and 124 of the complaint point out that the SCUC loans were targeted at subprime borrowers. According to the complaint, 46 percent of the borrowers had credit scores below 600 and "were subject to interest rates of 13.75% or 16.25% and origination fees of 10%."
The complaint states that a majority of these SCUC loans ended in default.
In paragraph 127, ITT's consultants projected a gross default rate of 63 percent on SCUC loans. In paragraph 154, ITT projected that the gross cumulative default rate for the SCUC pool of loans from 2009, which is the oldest and most seasoned pool of loans, would exceed 70 percent.
While the lawsuit targets ITT, credit unions that funded this private student loan program should not get a free pass.
Where are the credit union regulators and why haven't we seen any enforcement orders or civil fines against credit unions?
Read the CFPB complaint.
Seven credit unions founded Student CU Connect (SCUC) -- Eli Lilly Federal Credit Union in Indianapolis, Ind.; Bellco Credit Union in Greenwood Village, Colo.; CommunityAmerica Credit Union in Lenexa, Kan.; Workers’ Credit Union in Fitchburg, Mass.; Directions Credit Union in Toledo, Ohio; Veridian Credit Union in Waterloo, Iowa; and Credit Union of America in Wichita, Kan. (check out the November 5, 2009 press release).
Eli Lilly Federal Credit Union was the originating entity of the student loan participations. (I will note that Eli Lilly FCU has ended this loan program with ITT). Participating credit unions made a three year commitment to fund a pre-specified amount of student loans each quarter.
The press release for SCUC makes it clear that this program was a good source of revenues for credit unions.
Paragraphs 120 through 128 of the CFPB complaint describe the SCUC private loan program (link to the complaint can be found at the end of this commentary).
The complaint notes that from March 2009 until December 2011 SCUC originated $189 million in student loans to ITT students. SCUC was only available to ITT students.
Paragraph 121 discusses the connection amongst ITT, SCUC, and the lead credit union, Eli Lilly FCU.
"SCUC was the brainchild of ITT or its paid consultants, and ITT was actively involved in the creation and support of SCUC by developing the underwriting criteria, providing a credit facility, and paying the credit union membership fees in the lead credit union on behalf of the students who took out SCUC loans. ITT was also actively involved in the servicing and collection activities of SCUC. In addition, ITT provided a stop-loss guarantee to the program participants: if defaults exceeded 35%, ITT would make the credit unions whole for any further defaults."
Paragraphs 123 and 124 of the complaint point out that the SCUC loans were targeted at subprime borrowers. According to the complaint, 46 percent of the borrowers had credit scores below 600 and "were subject to interest rates of 13.75% or 16.25% and origination fees of 10%."
The complaint states that a majority of these SCUC loans ended in default.
In paragraph 127, ITT's consultants projected a gross default rate of 63 percent on SCUC loans. In paragraph 154, ITT projected that the gross cumulative default rate for the SCUC pool of loans from 2009, which is the oldest and most seasoned pool of loans, would exceed 70 percent.
While the lawsuit targets ITT, credit unions that funded this private student loan program should not get a free pass.
Where are the credit union regulators and why haven't we seen any enforcement orders or civil fines against credit unions?
Read the CFPB complaint.
Friday, January 10, 2014
NCUA's Supervisory Focus for 2014
In a letter to credit unions, NCUA identified four areas of supervisory focus for 2014: interest rate risk, cybersecurity threats, money services businesses, and private student lending.
In addition, NCUA will examine credit unions to assess their compliance with the following new rules and regulations: loan participation rule, ability-to-pay and qualified mortgage standards, and credit union service organization rule.
Read the letter.
In addition, NCUA will examine credit unions to assess their compliance with the following new rules and regulations: loan participation rule, ability-to-pay and qualified mortgage standards, and credit union service organization rule.
Read the letter.
Monday, December 16, 2013
Private Student Loans, Q3 2013
While a small portion of the credit unions industry's loan portfolio is in private student loans, non-federally guaranteed student loans grew by almost 32 percent over the last year to slightly more than $2.5 billion in outstanding private student loans at federally insured credit unions.
However this growth in private student loans caused NCUA to issue a supervisory letter because "private student loans have unique features and risk characteristics that are unlike most other consumer loan products." The supervisory letter notes some of the unique issues associated with private student loans including that student loans have a deferral of repayment; borrowers often have little credit history; and repayment is often dependent on future employment and income.
For example, at the end of the third quarter of 2013, 39.28 percent of all private student loans ($986 million in private student loans) were in deferral status. This was up from 35.3 percent at the end of the second quarter.
Out of the 623 federally-insured credit unions that reported outstanding private student loans in the third quarter, 44 credit unions reported that all of their loans were currently in deferral repayment status.
NCUA reported that $36.2 million in private student loans were at least 60 days past due with a delinquency rate of 1.44 percent at the end of the third quarter. However, the agency is understating the true delinquency rate because it is including loans in deferral status it its calculation. If the delinquency rate is adjusted for loans in deferral status, the delinquency rate jumps to 2.38 percent.
In addition, another $29.8 million in non-federally guaranteed student loans were between 30 days and 59 days past due.
NCUA also reported that the net charge-offs of private student loans was $11.5 million or 0.68 percent of average private student loans. Once again, the net charge-off rate understates the rate of losses on private student loans; because the agency includes loans in deferral status in its calculation.
The following table shows the 25 credit unions with the most delinquent private student and their deferral adjusted delinquency rate.
Read the letter.
However this growth in private student loans caused NCUA to issue a supervisory letter because "private student loans have unique features and risk characteristics that are unlike most other consumer loan products." The supervisory letter notes some of the unique issues associated with private student loans including that student loans have a deferral of repayment; borrowers often have little credit history; and repayment is often dependent on future employment and income.
For example, at the end of the third quarter of 2013, 39.28 percent of all private student loans ($986 million in private student loans) were in deferral status. This was up from 35.3 percent at the end of the second quarter.
Out of the 623 federally-insured credit unions that reported outstanding private student loans in the third quarter, 44 credit unions reported that all of their loans were currently in deferral repayment status.
NCUA reported that $36.2 million in private student loans were at least 60 days past due with a delinquency rate of 1.44 percent at the end of the third quarter. However, the agency is understating the true delinquency rate because it is including loans in deferral status it its calculation. If the delinquency rate is adjusted for loans in deferral status, the delinquency rate jumps to 2.38 percent.
In addition, another $29.8 million in non-federally guaranteed student loans were between 30 days and 59 days past due.
NCUA also reported that the net charge-offs of private student loans was $11.5 million or 0.68 percent of average private student loans. Once again, the net charge-off rate understates the rate of losses on private student loans; because the agency includes loans in deferral status in its calculation.
The following table shows the 25 credit unions with the most delinquent private student and their deferral adjusted delinquency rate.
Read the letter.
Monday, June 13, 2011
Private Student Loans: An Emerging Risk
Are private student loans an emerging risk for credit unions?
Apparently, the Washington credit union regulator believes so.
On May 24, 2011, the Division of Credit Unions sent out a bulletin on Safe and Sound Student Loan Programs. Click here to read the bulletin.
Examiners from the Division of Credit Unions noted that "a few Washington credit unions have adopted student loan programs with very limited research and few controls."
The bulletin advises credit unions to due their due diligence before implementing the program, especially with regard to the underwriting standards of indirect student loan programs offered by third party vendors.
Additionally, the bulletin recommends that credit unions minimize their concentration risk by limiting growth of no more than 10% of the credit union’s net worth per year. The Division of Credit Unions recommends that the concentration limit remain in place until the credit union has at least three years of satisfactory experience with the private student loan program and at least two years of collecting material amounts of the loans.
As of the end of the first quarter of 2011, 385 credit unions held slightly more than $1 billion in private (or non guaranteed) student loans on their books.
Four credit unions report holding non-guaranteed student loans in excess of their net worth -- Huron Area Education FCU, Mass Institute of Technology FCU, CTCE FCU, and Harvard University Employees Credit Union. Ninety-two credit unions have private student loans in excess of 10% of their net worth.
Digital FCU has the most private student loans at almost $65.3 million. Other credit unions with sizable private student loan portfolios are University of Wisconsin Credit Union at $49.7 million and Eastman Credit Union at $44.9 million.
The following table lists the 25 credit unions with the most private student loans (click on image to enlarge).
Apparently, the Washington credit union regulator believes so.
On May 24, 2011, the Division of Credit Unions sent out a bulletin on Safe and Sound Student Loan Programs. Click here to read the bulletin.
Examiners from the Division of Credit Unions noted that "a few Washington credit unions have adopted student loan programs with very limited research and few controls."
The bulletin advises credit unions to due their due diligence before implementing the program, especially with regard to the underwriting standards of indirect student loan programs offered by third party vendors.
Additionally, the bulletin recommends that credit unions minimize their concentration risk by limiting growth of no more than 10% of the credit union’s net worth per year. The Division of Credit Unions recommends that the concentration limit remain in place until the credit union has at least three years of satisfactory experience with the private student loan program and at least two years of collecting material amounts of the loans.
As of the end of the first quarter of 2011, 385 credit unions held slightly more than $1 billion in private (or non guaranteed) student loans on their books.
Four credit unions report holding non-guaranteed student loans in excess of their net worth -- Huron Area Education FCU, Mass Institute of Technology FCU, CTCE FCU, and Harvard University Employees Credit Union. Ninety-two credit unions have private student loans in excess of 10% of their net worth.
Digital FCU has the most private student loans at almost $65.3 million. Other credit unions with sizable private student loan portfolios are University of Wisconsin Credit Union at $49.7 million and Eastman Credit Union at $44.9 million.
The following table lists the 25 credit unions with the most private student loans (click on image to enlarge).
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