Newsroom

The NCUA Wednesday issued a Letter to Credit Unions flagging risk management considerations as student loan payment obligations resume. Federal student loan interest resumed Sept. 1, 2023, and payments restarted this month after being paused amid the pandemic.

The NCUA noted some credit union members’ ability to repay other outstanding loans may be negatively impacted as they restart student loan payments. Credit unions may experience:

• an increase in delinquencies;
• a reduction in borrowers’ credit scores;
• a concentration of credit risk, depending on how many of the credit union’s borrowers have federal student loans;
• deterioration in loan performance; or
• increased losses within credit union loan portfolios.

To ensure proper risk management, the NCUA recommended credit unions:

• assess aggregate exposure to borrowers with federal student loans;
• conduct appropriate borrower outreach for members who have large repayments;
• apply prudent underwriting and loss mitigation strategies;
• identify and monitor higher-risk portfolio segments with student loan payment stress exposure; and
• consider whether the risk associated with the resumption of federal student loan payments is adequately captured within the allowance for credit losses (ACL).

Read the full letter.