The long moratorium on student loans (which began in March 2020) is ending. Starting in October – just a couple days from now – people will have payments due on their student loans again. The data shows this will be a difficult transitionary period for some members or customers.
There is a total of $1.7 trillion of student loan debt in the US, and the Consumer Financial Protection Bureau says one in five borrowers are at risk of financial difficulties this fall. This is likely caused by an increase in other debts. CNBC reports 50% of those with student loans increased their credit card debt since the moratorium began.
What does all this mean for your bank or credit union strategic planning? Let’s touch on a few points.
Consumers Need Sound Advice
Some members or customers may feel like they’re drowning this October, especially if they have other debts on top of their student loan payments. It’s difficult for these consumers to see their way out of the muck and toward financial security.
Luckily, they have you!
Credit scores are going to take a hit, and you’re in a prime position to give people reliable guidance. Just because their score decreases doesn’t mean it can’t increase again. You just need to show consumers how to do it.
So, prioritize financial guidance this fall in your bank or credit union strategic planning. How to save, how to accurately calculate loan payments, how to make a budget and so on. If you can offer credit counseling services, now would be a great time to do it.
Employees Need Innovative Benefits
A portion of your staff might also feel the pinch of student loan payment resumption. Financial stresses on the home front affect workplace performance…impacting the functioning of your entire institution.
That’s all to say: you can’t just hope everything turns out fine. You need innovative solutions as part of your bank or credit union strategic planning.
Last week’s newsletter briefly mentioned the CIF’s Impact Loan. This is a no-interest charitable loan you fund to help employees in need, and you can even choose for 10% of repaid amounts to build team members' emergency savings.
Another unique option is giving each employee the choice of contributing to a 401(k) or student loan repayment account. You can match the employee’s contributions into the account, just like you would with a 401(k), to help them pay off student debt faster.
Products Need to Hit Pain Points
Truthfully, there’s not much you can do to reduce a consumer’s student loan debt. But your bank or credit union strategic planning can help with all the other debt they added on top of it during the moratorium.
It’s a good time to market debt consolidation loans or credit card balance transfers to consumers. These products can simplify their other debts and (hopefully) give them better rates than they have on other loans.
You might also investigate marketing savings products outside of CDs. Someone struggling with student loan payments can’t tie up their money for long. A high-interest savings account could help someone if they qualify.
Of course, the resumption of student loan payments is just one of several factors impacting the industry right now. Tackling obstacles in the coming year will take planning, and On The Mark Strategies strategic planning facilitators can help. It’s not too early to schedule your bank or credit union strategic planning session for next year…slots fill up faster than you’d expect!