Most credit unions don’t offer student loans and they don’t want to. Often, credit unions will point students towards a major national lender (i.e. Sallie Mae) in return for a small finder’s fee.
This doesn’t give students many options or a good experience. Furthermore, it leaves a lot on the table for credit unions.
There’s a better way. Read on to learn about how to use student loans to accelerate membership of Gen Z and increase your non-interest income without becoming a student lender.
Better Borrowing Experience
Dozens of lenders provide student loans. Those lenders compete for rates and terms, and some lenders turn student loan borrowers into checking accounts, savings, accounts, and more.
There’s no good reason for credit unions to send students to only one of those lenders.
Especially not if it means your credit union is missing out on a member.
By partnering with a single lender, members miss out on everything that you could provide:
- A convenient local lending option for student loans;
- Choice from multiple competing lenders; and
- The beginning (or deepening) of a relationship with your credit union.
Convenience and better terms are key for securing the best terms available for members. But the last one is particularly critical. New borrowers for student loans need more than just loans. At the very least, they’ll need a checking account and debit card. They may also need a savings account and a credit card, and possibly a car loan.
They may miss on all this in a local-friendly option because your credit union has a limited borrowing experience.
Memberization and Credit Union Growth
When a credit union directs a member to a single student lender, they’re short-changing themselves in three ways by:
- Forfeiting the ability to add a member or deepen a member relationship
- Losing non-interest income by relying on just one lender for referral fees
- Offering no student loan assistance closes off that relationship entirely;
First, given the demand for student loans, credit unions should be ready to point student borrowers in a good direction. These borrowers are making massive financial decisions and need the kind of service, care, and education that credit unions bring.
Second, partnering with a single lender for a small-fee kickback does very little for both the borrower and the credit union. It’s the very definition of “selling out.”
Finally, any time someone is willing to apply for a financial product, a credit union should be ready to turn that application into a membership. A student borrower is a potential lifelong member. If a prospective student searches for “credit union student loans” and comes to you, that’s an opportunity you can’t lose.
Want to attract Gen Z and Gen Alpha? Provide support for student loans (even if you don’t provide those loans yourself).
Download the 1-pager to see how Sparrow earns 144% more revenue per funded loan (and funds 4.5x more loans) than Sallie Mae Smart Connect:
Introducing Sparrow
Sparrow provides the ability to earn the benefits of credit union student loans without becoming a student lender. This effectively engages Gen Z (and soon Gen Alpha).
In a nutshell, this is how Sparrow works:
- Sparrow hosts a marketplace of 23+ student loan providers.
- Sparrow creates a white-label portal so that student borrowers can stick with the first brand they turned to.
- Sparrow helps borrowers find the right loan provider for them.
- When the borrower submits a loan application, Sparrow turns that into a membership application as well, which often means the credit union gets a new member.
- Finally, Sparrow pays nearly 3x the finder’s fee that other lenders pay for approved loans.
Moreover, this isn’t a heavy lift for credit unions. Single API, no-code automations, forms that pre-populate with existing user data… Sparrow’s goal is to make things easier, both for credit unions and student borrowers.
Of course, there’s little point in booking a loan and starting a relationship if there’s no plan to deepen it. That’s where the real-time analytics and data come in. Sparrow gives credit unions everything they need to send follow up offers for other helpful products.
In short, Sparrow is a memberization engine for student borrowers. They present a legitimate way for credit unions to grow, gain Gen Z members, and pull in significant non-interest income.
Additional Resources
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