STCU drops student loans
Spokane Teachers Credit Union has stopped making student loans.
Despite its roots in education, President Steve Dahlstrom said this week, STCU cannot justify making loans sure to lose the institution money.
Changes made last year in federal law all but assure red ink, he said.
Interest rates allowed on two major loan programs will be ratcheted down to 3.4 percent by 2011. The current rate is 6.8 percent.
Dahlstrom said STCU will not be able to obtain money cheaply enough to keep up with the decreases. Fees paid to the federal government have also increased.
Also, the former 100 percent guarantee against loan defaults, already lowered to 98 percent, will be reset again at 95 percent.
All this comes, Dahlstrom said, against the backdrop of the U.S. Department of Education’s own Direct Loan program, which shifts costs such as overhead to taxpayers.
“This is Congress’ way of trying to reduce the cost of an education,” Dahlstrom said, but dozens of institutions around the country are dropping out as the credit crunch triggered by mortgage loans spreads.
STCU student loans peaked at $13.6 million in 2005, he said. The total last year was $9.2 million, for 2,003 loans, all to credit union members.
Dahlstrom said STCU directors regretted the decision to stop making loans for the next scholastic year but thought there was no alternative.
“You don’t want to penalize other members,” he said. STCU membership, at 73,000, is the largest in Eastern Washington.
“That was a hard decision,” Dahlstrom said. “We do so much to support the schools.”
Financial aid officers at Gonzaga University and Eastern Washington University said the STCU decision was unfortunate but probably would not curtail student access to loans.
“We’re already in the process of shifting them to other lenders,” said Bruce DeFrates, director of financial aid and scholarships at EWU.
He said STCU loans represented about 12 percent of the total taken out by EWU students, 55 percent of whom rely on financial aid to pay for their education.
Those who borrow owe an average $19,500 when they graduate, he said.
Gonzaga Director of Financial Aid Darlene Hendrickson said few students there had STCU loans.
The vast majority of students rely on direct student loans, she said.