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Student Loan Debt Expected To Top $1 Trillion

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According to recent news articles, outstanding student loan debt is expected to hit $1 trillion this year for the first time.  Researchers say that Americans now owe more on student loans than on credit cards.

As students are borrowing more than ever, the amount of delinquencies is growing too.  Student loan delinquencies (loans more than 90 days past due) are now at 11.2%, up from 10.6% in Q1 2011.

Student loans are difficult to shake because borrowers can’t get rid of them with methods like personal bankruptcy.  At the same time, increasing amounts of student borrowing could have a major impact on the future economy.  Experts say that students who borrow too much will delay things like buying a car/home, getting married and having children.

If your credit union offers, or is thinking of offering student loans, there are 3 important questions to consider:

  1. Is it the credit union’s responsibility to ensure students do not over-borrow?
  2. What is the best way to manage borrower expectations to not lose trust if the credit union is forced to take collective action?
  3. If the laws change regarding student loan collections, what must the credit union do to prepare?

Sources:

  • Scariest Student Loan Debt Numbers Ever:  $100 Billion, $1 Trillion, TIME Magazine, 10/19/11
  • Student Loans Outstanding Will Exceed $1 Trillion This Year, USA Today, 10/18/11
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Doing More With Less

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Experts say one of the biggest outcomes from the current recession will be leaner companies that run more efficiently with less staff.  According to a recent article titled Companies Do More With Fewer Workers (USA Today, 02/23/11), productivity has risen more in the current recovery than previous ones (except for 2001), jumping 3.5% in 2009 and 3.6% in 2010.  This is because companies are being forced to find efficiencies through new technology or software, cutting out unnecessary steps, scrapping marginal products or simply squeezing more from existing employees by combining two or more jobs into one position.

Are there processes at your credit union that can be improved?  Are your employees focused on the right thing at the right time?  Are you able to provide timely, accurate information to your members?

As member preference and the economic and regulatory environment continue to evolve it may feel like there is less and less we can control—so control the things you can control to leave some slack for the things you cannot.