Campus Credit Unions Help Students Start Out Right
by Judy Dahl
For today's college students, "It's hard enough graduating with student loans to pay off without also having $20,000 in credit card debt," says Earl Lloyd, administrator of university development and alumni relations, Pennsylvania State Employees Credit Union (PSECU), Harrisburg.
It's a situation he's seen many students face. That's why on-campus credit unions like PSECU focus on teaching students how to manage their finances and stay out of debt.
Many college students are managing their own accounts for the first time, and on-campus credit unions can help them start out right. Because credit unions are member-owned, not-for-profit financial institutions, they charge fewer and lower fees, have lower minimum balance requirements, and offer better rates than banks. And what could be more convenient than a financial institution located in the center of campus, often right in the student services center?
"It's an opportunity for students to have a low-cost account and to learn the difference between credit unions and banks," says Lloyd. "Many students are more sophisticated about technology than in the past, but they often don't understand that every time they make an ATM [automated teller machine] transaction and pay a $1.50 or $2 fee to a bank, they're paying 10% to 20% in interest." PSECU and other campus credit unions also offer educational seminars that teach students about concepts like this.
Focus on education
Front-line campus credit union employees help educate members too. "All of our tellers are teachers," says Dave DiCosola, a university student and CEO of First Miami University Student Credit Union, Oxford, Ohio. "Banks make you jump through hoops and treat you like a number, not a person. Members spend more time in our credit union because they get information on how to spend and save," he says.
"Major banks aren't looking out for the best interests of students," agrees Stacia V. Brooks, CEO, Kent (Ohio) State Student Credit Union. She's also a student at Kent State. "Students are new at financing, even at learning to balance a checkbook. If they bounce one check, banks are likely to charge them large fees. At the credit union, we do education on managing checking accounts and on the warning signs of being in trouble with credit cards--the bank we're competing against doesn't do that."
It's hard enough graduating with student loans to pay off without also having $20,000 in credit card debt.
DiCosola adds, "We understand members' mistakes and work to help them learn." He also sees many students who have trouble balancing their checkbooks--or who don't balance them at all. "They end up with overdraft fees, and if we were really strict about these we'd make tons of money. Instead we teach them to record their charges and we refund many of the fees."
Willard Hopkins, manager at First Miami University Student Credit Union, says his credit union does a lot of financial counseling. "We help students understand the importance of establishing credit, and of their credit score; many employers are now doing credit checks during the hiring process." Few students realize that a poor credit record can cost an otherwise qualified candidate a job.
Hopkins has seen credit card debt mar many students' credit records. "That's the big issue on campuses today. Some financial institutions market high-interest cards to students, who then get into serious debt," he says. "We do work-out loans for these people--we give them a loan at a reasonable rate, and allow them to pay it off over two or three years to help them improve their credit scores."
Student-friendly products
Campus credit unions offer other products geared to students' needs, such as low-interest loans to help students buy computers, relocate after graduation, or even to pay their fraternity dues or take a trip over spring break. "We understand students' needs, and we structure our offerings to students," says Kent State's Brooks. "Our fees are lower, and you're more likely to get a loan if you have no credit [history] or bad credit."
Many college students are managing their own accounts for the first time, and on-campus credit unions can help them start out right.
"Students want services delivered in a right-here-right-now way that most financial institutions aren't ready to provide," says Michael Beall, president and CEO of the Maryland Credit Union League and a member of the Campus Credit Union Council's advisory board. He says campus credit unions are structured to serve these younger members.
"We offer loans for kids that study abroad, and we'll give students a $500 credit card to buy books, even if they have a poor credit record or no credit record," says First Miami's DiCosola. "We also have a $250 book scholarship. When students open an account, we enter them in a drawing for the scholarship."
Many campus credit unions serve university faculty and employees along with students, and sometimes their families. These members have access to the same products and services students use.
"Students' parents can open accounts at the credit union and get loans," says Brooks. "If they want to electronically transfer an allowance from their account to their child's, we can do that."
A safe way to manage finances
In fact, parents often approach campus credit unions on behalf of their students. "Many kids come from out of state and don't have a local financial institution. We encourage parents at orientation to consider the credit union, and a lot of them sign their kids up," says DiCosola. "Parents want to give kids a safe way to start managing their finances."
In his days working with students, faculty, and staff at CommonWealth One Federal Credit Union, Alexandria, Va., Beall counseled parents and students alike. "We had hundreds of conversations with families making financial decisions with or on behalf of their children," he says.
A poor credit record can cost an otherwise qualified candidate a job.
"It's an issue parents should think about when visiting college campuses, or before their students move in," adds First Miami's Hopkins. "Is there a credit union on campus, or one nearby?
"Every credit union's goal is to provide affordable financial services to members," says Hopkins. "Campus credit unions introduce students to an affordable financial partner. They can maintain the relationship when they leave college--either with the campus credit union or another one. We get them started right."
June 6, 2005
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