The resumption this month of federal student loan repayments may lead to difficulty for credit union members in their ability to repay other outstanding loans, and the federal credit union regulator said in a letter that it will not criticize credit unions for their efforts to provide “prudent” relief.
The National Credit Union Administration (NCUA), in Letter 23-CU-08 to all federally insured credit unions (FICUs), noted that the Department of Education’s COVID-19 relief for federal student loans is ending. Federal student loan interest resumed on Sept. 1, it noted, and payments restart in October. It said that as of June, 43.6 million individuals held a combined federal student loan debt of $1.64 trillion, which averages out to approximately $38,000 per borrower.
In its letter, the NCUA encouraged credit unions to work constructively with affected borrowers. The agency “will not criticize a credit union’s efforts to provide prudent relief to borrowers when such efforts are conducted in a reasonable manner with proper controls and management oversight and consistent with consumer financial protection requirements,” it said in the letter, released Wednesday.
Letter 23-CU-08 includes background on how examiners will evaluate credit unions’ within a set of risk management principles. It also outlines strategies credit unions may consider in addressing the strains on their members and, in turn, their own operations. It focuses specifically on risk assessment, borrower outreach, underwriting and modifications, portfolio monitoring, and allowance for credit losses.