As more Americans flock to colleges and universities against a backdrop of rising tuition costs, it is increasingly clear that we are in the midst of a student loan crisis. The proliferation of high-cost student loans outpaces both inflation and wage growth, and delinquency rates are now higher than ever before, surpassing all other mainstream credit products. In total, there is $1.45 trillion in student loan debt in the U.S., and it grows by $2,700 every second. Over 44 million Americans currently hold student loan debt.
As a result, millions of consumers (particularly millennials) burdened with student debt are delaying significant financial and personal decisions, such as saving for retirement, starting a family or purchasing a home. At a macro level, high levels of student debt are also serving to perpetuate and perhaps worsen economic inequality, undermining the opportunity and mobility that higher education has promised to so many Americans.
Credit unions are uniquely positioned to help student loan borrowers manage their debt through a combination of interventions, including offering a broad-based suite of solutions that meet consumers where they are in their life cycle to help them navigate and manage key financial milestones leading up to, during and after college. A comprehensive student debt strategy can offer millennials (and others) a unique value and positions the product lineup as a competitive differentiator in all communities where credit unions operate. High-quality solutions, including education, origination, repayment, refinance and mortgage innovations have the potential to positively impact consumers’ financial health.
MDC has partnered with the Center for Financial Services Innovation (CFSI) to identify actionable steps credit unions can take to address the student loan debt crisis. We are exploring innovative solutions related to both saving for college and repaying existing student loan debt. Additionally, we are brainstorming on creative mortgage product solutions that will help those hardworking, gainfully employed Americans with solid credit reach home ownership more quickly. We are eager to report on the results of these efforts at our upcoming owner meeting in August.
The student debt crisis is negatively impacting the communities we serve as more consumers put off important social and economic milestones, and addressing the student debt issue is a key component to guiding our credit union members toward financial health. Credit unions are in a unique position to offer a comprehensive offering to student loan borrowers, something that banks cannot (will not) provide. MDC is committed to helping our credit unions get there.