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Fed overhaul wont affect private student loans
WASHINGTON (9/21/09)--A bill passed Thursday by the House of Representatives to eliminate the Federal Family Education Loan Program (FFELP) has no impact on private student lending opportunities for credit unions, says Credit Union Student Choice, a student lending credit union service organization. The Student Aid and Fiscal Responsibility Act of 2009 (H.R. 3221) cuts out private lending institutions from originating the FFELP loans. While this measure would have grave ramifications for all lenders who originate federal student loans, the opportunity for credit unions in private student lending remains strong, according to Jon Jeffreys, president of Credit Union Student Choice. "The bill obviously has a huge impact on lenders who participated in …FFELP, whereby they were able to originate federal student loans," said Jeffreys. "However, it's important to note the distinction between federal and private student loans. "While they do share the same bankruptcy exemption as federal student loans, private loans are completely separate from the federal government and are meant to help students fill the funding gap after federal loans have been exhausted," he said. "The demand for these loans remains very strong--to the tune of nearly $15 billion this year alone." With ongoing economic challenges and ever-increasing college costs, Jeffreys said demand surely will remain strong for years to come, giving credit unions an "incredible" opportunity. "Credit unions involved in the Student Choice program experienced tremendous loan volume this summer," he said. "There is a critical need for lenders who can offer fair-value private student loans, and our credit unions are filling that need. We certainly look forward to helping credit unions who've been active in FFELP, as they look for new business solutions in replacing those federal student loans." The Credit Union National Association (CUNA), which lobbied against the bill, sent a letter Wednesday to House speaker Nancy Pelosi and other members of Congress expressing concern that the elimination of FFELP would remove a "valuable option" for students. CUNA President/CEO Dan Mica's letter noted that more than 1,000 credit unions--particularly those with membership bases related to a university--provide student loans. Many provide individualized service and support to loan holders. Jeffreys said that credit unions' not-for-profit, cooperative business model give them the ability to lend from their own balance sheet and makes them uniquely suited to deliver superior economic value in private student lending. This summer, its client credit unions approved more than $100 million in loans, helping more than 5,000 students attend college this fall. The average loan rate was below 6%, nearly 400 basis points below the average private student loan rate being charged by the nation's largest student lending companies. "It's very apparent that credit unions are providing superior economic value to consumers," Jeffreys said. Credit Union Student Choice is a credit unions service organization that provides turnkey private student lending services to 83 credit unions, which offer private student loans to more than five million members.


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