TCU students who are collectively borrowing $350,000 from a credit union may have to seek financial assistance elsewhere because of legislation that overlooked credit unions when setting better rates for nonprofit organizations, a financial aid officer said.
With loan companies backing out of the federal loan market, many students have turned to credit unions for help, but credit unions are facing similar struggles with the loan market, said Melet Leafgreen, assistant director of scholarships and financial aid.
Even though lenders and credit unions are struggling with the current credit crunch, TCU students will have loans available next fall, Leafgreen said. Alternate lenders will be available for financial assistance, she said.
“The unions were overlooked when legislation set better rates for nonprofit organizations,” said Allison Griffin, spokeswoman for Texas Credit Union League.
Although most credit unions are nonprofit, some are for-profit, Leafgreen said.
The University Federal Credit Union, based in Austin, is the biggest of several unions that students use for financial aid, Leafgreen said.
“TCU students borrowed $350,000 in loans from UFCU,” Leafgreen said. “It is not just one or two students using UFCU; it is a significantly large amount.”
Leafgreen said she doesn’t know how many students use credit-union loans.
When Congress passed legislation in September to cut money from the federal loan market for students and establish better rates for for-profit and nonprofit lenders, Congress failed to provide the same advantages for credit unions, Griffin said.
Most loans are federally guaranteed loans in which the government will pay back a certain rate or percentage of money students owe to lenders, Leafgreen said. Those percentages have been established by Congress for for-profit and nonprofit organizations but do not include credit unions, she said.
This could potentially become a problem for students because credit unions need an established rate to stay in the lending business, otherwise they may have to stop providing loans like other lending companies such as Sallie Mae and College Loan Corporation, Leafgreen said.
The number of students using UFCU is significant, so lobbying for recognition is in the best interest of students and the union as well, Leafgreen said.
UFCU did not return phone calls seeking comment.
Credit unions want to step up to help offer more lending options to universities and students in a recently-tightened student loan market, Leafgreen said. To offer such opportunities, unions need to qualify for the nonprofit rate Congress set at 98 percent, she said.
Credit unions are lobbying Congress in hopes of becoming eligible for the same established rates as nonprofit organizations, Leafgreen said.
The unions are meant to provide low-cost lending options for students but can’t without help from Congress, Griffin said.
Only a few credit unions are among the largest participants in student loans, but, if change is achieved, unions could offer more than $100 million in loans, said Mark Kantrowitz, publisher of FinAid.org, a Web site that provides students with financial aid advice.
Not including credit unions in rate changes will affect students, Kantrowitz said. Although unions are not a large part of the “lending pie,” they do provide solutions for students, he said.