ALEXANDRIA, Va.—The NCUA has sent a Letter to Credit Unions addressing management considerations and potential risks as student loan payment obligations resume.
October marks the official restart of payments on federal student loans, which began accruing interest again effective Sept. 1.
As CUToday.info has been reporting, the resumption of payments is expected to put a crimp on many individuals and households that have not had to make payments since the federal government put a pause in place three years ago during the pandemic. As CUToday.info also reported earlier, the average consumer with a student loan carries about $35,000 in debt, according to a new TransUnion study.
‘Prudent’ Strategies
NCUA said the point of its new letter is to outline prudent risk management strategies for credit unions to consider as borrowers resume making their federal student loan payments.
“The NCUA encourages credit unions to work constructively with impacted borrowers and will not criticize a credit union’s efforts to provide prudent relief to borrowers when such efforts are conducted in a reasonable manner with proper controls and management oversight and consistent with consumer financial protection requirements,” the agency stated in the letter.
The agency is cautioning credit unions to be ready to address and increase in delinquencies, deterioration in loan performance and increased losses within their loan portfolios.
“Credit unions should identify and monitor higher-risk portfolio segments with student loan payment stress exposure,” NCUA said. “Higher-risk segments could include related loan types or sections of the portfolio with multiple layers of risk.”
Examples Cited
NCUA said examples include, but are not limited to, borrowers with:
- Private student loans
- Credit card balances or other debt obligations that materially increased while federal student loan payments were paused or that begin to increase following the resumption of federal student loan payments
- Adjustable-rate loans that have similar payment reset timeframes—for example, adjustable-rate mortgages or home equity lines of credit
- Elevated debt-to-income ratios or low credit scores
Just Because It’s Autumn Doesn’t Mean Falling for Schemes to Overcharge You for CU Industry News. Instead, Try This Crisp Offer
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news”” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?