Gaining Millennial Members BUILDING PARTNERSHIPS WITH PRIVATE STUDENT LOANS

Transcription

1 Gaining Millennial Members BUILDING PARTNERSHIPS WITH PRIVATE STUDENT LOANS Presented by: Jillian Gajtka Manager Strategic Partnerships

2 Who We Are: Credit Union Student Choice By credit unions, for credit unions Credit Unions in full control Sustainable loan growth CU Industry Asset Class Expertise Results Snapshot: 60,000+ young adult members assisted $1.7B under management 244 CU programs Strong portfolio performance Strong value to members

3 Student Loan Jeopardy CU Student Choice has what market share against the total $3.1 billion in outstanding private student loans held by credit unions? A. 36% B. 50% C. 41% D. 28%

4 Student Loan Jeopardy CU Student Choice has what market share against the total $3.1 billion in outstanding private student loans held by credit unions? A. 36% B. 50% C. 41% D. 28%

5 Who We Are: Credit Union Student Choice Net Income Positive Since December 2010 Proven & Trusted 50% Marketshare based on Q Report $1.7B of $3.1B NO Reputation Risk Zero Venture capital financing No exit strategy Credit Union Philosophy Owned & Managed Board President Brian Ducharme President of MIT FCU

6 Student Choice SOLUTION OVERVIEW

7 Programs Available to CUs LINE OF CREDIT (Undergraduate & Graduate Business): Member oriented benefit that streamlines application process and offers manageable monthly payment obligations given 20 or 25 year term. CLOSED END LOAN (Undergraduate): Traditional closed end loan with 15 year term. PRIVATE LOAN CONSOLIDATION (Undergraduate & Graduate): Closed end consolidation solution allows credit unions to recapture members that are saddled with high cost private loans from other lenders. Coming in 2016 (Universal Consolidation Loan): Allowing the ability to consolidate both private and federal loans into either a fixed or variable rate product with 5/10/15 year terms.

8 Customizable Lending Platform UG LOC Credit Union Controls: Establish loan policy Create underwriting standards Determine approved schools Loan Document Customization Set interest rate tiers & structure Set loan limits Allocate allowance for loan loss Review/approve loan decisions Dictate borrower/co borrower membership Control funding of loan Forbearance decisions Audit/Compliance Student Choice Program Parameters and Best Practice Guidance: Underwriting School certification, co borrower emphasis, credit criteria Approved Schools Four year, not for profit Advise against those with high CDR Loan Terms LOC 20 or 25 yr, Closed End 15yr Allowance for Loan Loss In School Repayment Options Full defer, interest only, smart start payments of $50 Repayment Options Graduated repayment

9 Why Consider Private Consolidation? Given today s historically low interest rates, there is a tremendous opportunity for lenders to take advantage of an underserved market Richard Cordray, Director of the CFPB 1. New Business Development a healthy lending strategy leverages diversification in asset classes (e.g. mortgages, auto, credit cards) 2. New Member Growth consolidation allows the credit union to launch new lending relationships with strong credit file consumers 3. Earnings variable rate loan offering ROA between 3% 4% 4. Immediate Repayment unlike traditional private student loans where members defer making payments while attending school, consolidation offers immediate repayment/cash flow 5. Mitigated Risk following best practices, the credit union can effectively insulate against losses

10 A New Solution for Credit Unions Private Consolidation Loan Best Practice Underwriting Criteria Highlights: Must have graduated from 4yr eligible institution Must be gainfully employed for past two years Must have a DTI no greater than 45% Must not have any accounts greater than 30 days past due Must meet your minimum FICO

11 Customizable Lending Platform PCON Best Practice Requirements: Only Private Student Loans are Eligible No Federal Loan Debt is Eligible Even 1 Loan Can Be Consolidated Borrower Must Be in Repayment Must Meet Minimum Borrower Requirements Standard DTI of 45% (May be adjusted) 2 Year Minimum Income/Employment 2 Year Residency No Delinquencies over 30 Days No Charge Offs, Bankruptcies or Foreclosure Must have graduated from an approved school. Forbearance decisions Product Details: Minimum Loan $5,000 Maximum Loan $100,000 Closed End Loan Plan 15 Year Repayment Plan Graduated Repayment Available Surety Insurance Available from Reliamax Priced using PRIME or LIBOR Variable Rate with quarterly resets Credit Union Defined NSF/Late Fees No Prepayment Penalties

12 Student Choice COMPETITIVE ADVANTAGE (ALL PROGRAMS)

13 Long Horizon Solution Our competitors deliver a product CU Student Choice delivers: VALUE (defined by) Service Quality College Planning for Members Financial Literacy for Millennials NCUA Exam Support Accounting Best Practices on ALLL Active Portfolio Management Marketing to Community/SEG/Colleges Loyal Millennial Member You receive a new millennial membership that is loyal to your credit union and consumer of other products/services offered.

14 Solution Elasticity = Quality Application volume surges in the summer months! More than 85% of new loan apps occur June August Model allows for our processing to scale and meet that demand outside of temporary help Call centers plug more full time employee credit card call reps into our queues Application Activity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

15 College Planning for Members Member Seminars Our Strategic Partners Team has conducted nearly 40 national seminars in 2015, attended by more than 1,000 members Open National Broadcasts Last summer, we offered a free national webinar to help college bound families on how to keep costs down and survive the first days of college. In January 2016, we offered a free national webinar on completing the FAFSA 1:1 Counseling Launched free individualized counseling service for families to schedule in depth consultations with our college planning expert

16 Modern Millennial Focused Financial Literacy Videos & Articles More than 1,000 original videos, articles, and info graphics with new content added daily. Interactive Modules Custom curriculum with interactive videobased info on everything from students loans to managing your money. Student Loan Help Student loan balance reminders, step bystep FAFSA help, scholarship assistance, repayment calculators and more. Career Development Personalized entry level, internship, and job search engine with resume analyzer and cover letter assistance. Live Webinars Live HD tutorials on hot button student loan and money topics. Townhall Forum Expert moderated community forum where students receive answers to questions from experts and peers. Games, Calculators and Simulators Take your favorite NFL team down field with Financial Football and explore many of the other great resources. Personalized Profile Personalize your experience with dynamic content, recommendations, courses, and badge awards.

17 Comprehensive Regulatory Support I ve been told they are through with loans. Day seven of our NCUA exam and not a peep about Student Loans. An old mantra, often used with computer conversions but applicable in many other places, The more you sweat before a planned event the less you have to sweat during and after. Lew Stubbs Chief Lending Officer Meridian Trust Federal Credit Union WY $281M / $576K I thought the prep was very thorough and well put together, and I would love to share my experience with other credit unions. I am also glad to say that we did not have any findings with our NCUA audit! Woohoo! Thanks for your willingness to always assist Members 1st! Tiffanie DeVan Specialty Loan Administrator Members 1 st Federal Credit Union PA $2.46B / $55.3M

18 Hands on Marketing = New Loyal CU Member 9 credit unions 8,000 borrowers 58% avg. checking penetration 18% avg. credit card penetration 9% avg. auto loan penetration 6% avg. deposit penetration Collateral Pieces via Digital Storefront

19 Pricing Summary Start up Expense: $5,000 (Undergrad LOC & PCON/UCON) Processing Fee: $210 Initial App & $75 Draw Requests for Undergrad $250 PCON Servicing Expense: $4/month/borrower Management Fee: 1.00% of cumulative funded balances *Fees are approximate; please see Fee Schedule for exact amounts

20 Return on Assets Gross Yield 6.25% Student Interest Rate (Prime %) [AS DICTATED BY CREDIT UNION] Servicing Servicing = (0.48) $48/yr in school and repay Credit Risk Loan Loss Reserve/Insurance = (3.50) CU funds own loss allowance Management Management = (1.00) CU Student Choice management fee Loan Origination Processing = (0.25) $250 origination cost amortized over 10yrs* HCOF Historical COF of 1.0% (estimated CU should input this number) Net Yield ROA 3.52% (year 2) *processing costs amortized Assumptions: $10,000 loan amount; 10 yrs; amortizing processing expenses over 10 year period; Prime = 3.25%. Including PLL in year one the ROA is at break-even; however, moving forward in year two, it rises to 3.52%

21 Thank You WHAT QUESTIONS DO YOU HAVE ABOUT GETTING STARTED WITH STUDENT CHOICE? JILLIAN GAJTKA MANAGER STRATEGIC PARTNERSHIPS