Credit unions remain healthy in the currently economy due to key differences in our structure. As cooperative financial institutions, credit unions are not reliant upon the capital markets for funding, but are instead funded through member deposits. Therefore, as the credit crunch hit much of the economy, credit unions by contrast have money that they're ready to lend out to their members. In addition, it is the mission of credit unions to help people so they are the perfect financial institutions for a program such as Governor Rell’s Student Loan Program.
● The program consists of credit unions in Connecticut, who have the resources, to allocate their own funds that would be earmarked for their own student loans. The funds will not be pooled. These loans would be offered to students who may not qualify for traditional loans or already used all of their resources and are having a hard time funding tuition. Collectively, credit unions can potentially make available up to $17.5 million for loans.
● In light of taking on this risk, 20% of the loan would be guaranteed through the Connecticut Health and Educational Facilities Authority (CHEFA). The 20% guarantee is for the total loan up front and then on the balance going forward
● To participate in the program, credit unions must be able to set aside, or allocate, at least $100,000 in their funds to be used for these loans.
● The loan program will be offered for approximately a time frame of one year and will be evaluated in one year to determine future need.
● Loan underwriting and loan terms will determined by each individual credit union involved (each credit union will have in place an appropriate policy approved by its board of directors based on capital and portfolios - NCUA and DOB required.)
● The program will have a common theme from credit union to credit union. Interest will be deferred, not waived, for at least one year for loans with a fixed rate at or under at least 6%. If a credit union is not able to offer a deferred rate they will offer the loan at or under at least 5.75%.
● The Credit Union League of Connecticut will provide each participating credit union a list of suggestions that can be incorporated into each credit union’s individual underwriting policy for additional uniformity to the program.
● The League will administer and track the program with CHEFA.
● The participating credit unions are listed and highlighted on the front page of www.culct.coop and www.culocator.com and that a link to these sites may also appear on the Governor’s website.
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