Helping Members Make Smart Student-Loan Repayment Decisions

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Nikole John
Senior Analytics Performance Manager
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Vicki Potter
Senior Analytics Performance Manager
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Three analytics strategies for empowering members to navigate the maze of student debt.

A variety of COVID-19 economic relief packages continue to present people with tough choices. From SBA debt relief and PPP loans to eviction bans and mortgage forbearance, pandemic financial assistance has been a complicated maze for many to navigate.

In some cases, participation in these programs is automated to the degree that borrowers may not even know they have an option not to participate. This is particularly true for student loan borrowers, many of whom are young people who may not fully realize the implications of putting off debt repayment. Plenty of non-traditional students, too, are wrestling with decisions around taking part in the programs, as well as the time-consuming process of declining the relief.

Although the federal student loan repayment pause is scheduled to end on Jan. 31, 2021, many believe it will be renewed, generating even more "should I or shouldn’t I" questions for education debt holders – and an even greater imperative for credit unions to offer guidance.

Financial experts know there are many alternatives to simply pausing loan repayment.

Not many borrowers do. Data can help credit unions provide that guidance in a few ways:
  1. Quickly finding the student loan holders within a membership.
  2. Identifying those members most likely to welcome assistance with decision-making.
  3. Crafting personalized plans to offer prescriptive solutions.

What follows are three ideas for leveraging data to achieve the above outcomes.

Expanding Fields in Credit Pulls

As we speak, many credit unions are re-evaluating the financial health of their existing borrower members. In doing so, they are pulling credit reports from the three bureaus. Rather than stop with the basic fields provided in those pulls, credit unions should also request data on student loan repayment and a few other attributes, such as interest rates and monthly payments. This will help credit unions identify those members juggling multiple loans. What’s more, analysts can provide outreach teams with more intelligence around how student loan payments fit into the full picture of monthly repayment obligations and some of the longer-term implications of deferment.

With that information, a credit union can offer hyper-personalized debt consolidation or refinancing solutions. Members can then be in a much better position to cash-flow the inevitable resumption of student loan and other payments as the nation enters recovery.

Getting Granular with Offers

Because credit unions are already in the throes of exploring borrower credit trends, their underwriting matrixes are likely handy, as well. Those models will help credit unions identify which members with student loan debt they can help, and to what degree.

By entering a certain segment of members into the model, lenders can know ahead of outreach what rates and terms they are likely to qualify for. This intelligence prevents credit unions from promoting blanket offers that may disappoint more members than it can help.

Why offer an entire group of student loan holders a consolidation program if only 2 percent are likely to qualify? Perhaps, the data shows that a refinancing campaign makes more sense. Or, perhaps the data can pinpoint a group of likely qualifiers based on the fact they also hold an auto loan with the credit union or own a mortgage with another provider (collateral!). Bonus: getting indirect members on a healthy loan repayment track could open doors to an even greater relationship.

Layering Data Sources for Clarity

Not every member will require a product-based solution to their problems. In fact, some members may not even realize problems are on the horizon. For this group, education or financial counseling may be the most relevant engagement.

Recent graduates, for instance, often don’t begin repaying their loans until six months after receiving their degrees. Even in normal times, that deferment can create an unrealistic picture of income vs. expenses. Add pandemic-related unemployment issues on top, and it’s safe to assume additional complexities for those just out of school.

Using a combination of first- and third-party data, credit unions can identify the recent or soon-to-be grads within their memberships. Segmenting by age can be a great place to start, as approximately 70 percent of high school graduates attend college – many of whom will eventually carry student loan debt. Of 2019’s college grads, 69 percent left school with an average debt of $29,900.

If resources allow, layering partner data from providers, like Acxiom or Claritas, over the top of that segmentation can help paint a better picture of the needs, wants and beliefs of identified members. That way, financial wellness coaches within the credit union can know exactly who to target with exactly what kind of message.

Becoming Your Members’ Personalized Guide to Financial Success

COVID-19 relief programs, regardless of their complexities, are designed to help, not hurt. But it’s not always that simple.

Participating in a popular program because that’s what everyone else is doing is rarely the right way to go about making a financial decision. Yet, consumers often don’t have the personalized information or customized guidance to go a different way.

Sometimes, a lack of financial acumen leads to missed opportunities; sometimes it draws the attention of predatory lenders and scammers. Credit union members have the distinct privilege of belonging to a financial institution that can offer the guidance they need to avoid both. A member joins a credit union because it promises to know them and to leverage its freedom from shareholders to put the member on a path to financial success.

Data can help your credit union follow through on the promise of people helping people. If our data analysts can work with your team to pinpoint the possibilities, don’t hesitate to reach out. Or, if your credit union has a story about how it’s helping student loan borrowers weather the storms of COVID-19, please share it. We may even tell it here in a future blog post.