Help members prepare today for repayment tomorrow.
The fourth extension of the U.S. moratorium on federal student loan payments means millions of credit union members continue to have options around repayment of debt. For the financially savvy, choices are probably welcome. For others, financial options can be confusing and even a bit overwhelming.
It’s easy to spot points of confusion. Here’s just one example: Earlier this year, the Federal Reserve Bank of New York reported that the moratorium had so far saved Americans more than $7 billion per month in payments. Referring to that number as a “savings,” however, is a bit of a mischaracterization. After all, the moratorium was simply a pause on repayment, not a loan forgiveness program.
No doubt, millions of credit union members took the opportunity to pause repayment at some point since the moratorium was instituted in March 2020. The question now becomes, how prepared are those members to restart their payment engines come February 2022? Particularly as other relief programs, such as the eviction moratorium, will also soon expire, it’s critical to ensure members are prepared for what could be dramatic swings in their budgets come springtime.
Leveraging Data to Identify and Help Member Borrowers
Credit unions can help members make the smartest decisions for their individual circumstances by taking a highly personalized approach. Not every member will need a financial product to see them through the transition. Some may just need a bit of coaching around spending, budgeting or financial planning. Others may need a higher level of education and insight with information around strategies for avoiding delinquency, accrual of large interest and damaged credit scores.
Using data from within their own systems, credit union teams can first identify those members most likely to welcome the support. Additional data sets can help design custom strategies for directing different kinds of support to different kinds of circumstances.
Naturally, credit unions with their own student loan programs will have rich levels of insight into members’ COVID-era behaviors because they are dealing with their own loan books. They will be in a terrific position to reach out proactively to help members who paused payments plan ahead for spring 2022. However, credit unions without formalized programs can still formulate a strategy to assist the student loan borrowers within their membership, simply by looking at ACH files.
Use ACH Files to Find Members Who Paused Repayment
Within ACH data, perform a basic inquiry search for the top student loan companies. This will produce a list of members who have student loan debt. That list can then be narrowed to show those members who paused repayment during the pandemic. It can even show those who paused initially, but have since restarted on their own ahead of the moratorium expiration. (Perhaps a kudos, a congratulations or even a reward of some sort could be sent their way to show the credit union is paying attention and applauding their financial tenacity.)
To achieve an even richer level of segmentation for greater personalized outreach, perform average balance trending or cash-flow and direct-deposit analysis. This will reveal members who are experiencing any one or a combination of the following:
- Paused student loan payments
- Lost income during the pandemic
- Recent decreases in cash flow
- Entirely new sets of expenses or debts threatening overall financial health
Once the list of borrowers has been built and segmented, credit unions can offer the right assistance to the right members at the right time (now!). Whether that is budgeting support or student loan refinance products, the idea is to put the offer in a personalized framework – one that says, “We see you. We know you. We are here to point you in the right direction if you’d like the help.”
Even as Economy Improves, Members May Still Struggle
Senate and House Education Committee heads put it best in a June 2021 letter, “…more than nine million Americans remain out of work, and the economic and health disparities created by the pandemic are severe.”
As more fintech disruptors and big tech brands enter consumers financial services decision sets, opportunities like loan repayment coaching and assistance will help credit unions continue to prove their difference. Credit unions that proactively find and help the people who need it most will not only inspire long-time loyalty and engagement from members, they’ll more fully live out the credit union mission of people helping people.