May 2, 2025
Credit unions are no strangers to uncertainty, but these days it’s coming from all sides. Keeping up with ever-shifting member expectations is one thing, but to do so amid regulatory shakeups, the dismantling of other federal institutions that affect credit unions, and a full-blooded, renewed attack on tax status has the system stretched thin.
Consumers are weathering the current economic storm, just, but for how long? And how can credit unions ensure they’re still there, relevant, and able to support their communities when the tipping point comes?
“Be you. Be unapologetic about it. That will be the best advocacy credit unions have against taxation; against any kind of regulatory changes we don’t like,” says Samantha Beeler, president of The League of Credit Unions and Affiliates, on a recent 22 Minutes in Lending episode.
“If we’re unapologetically us and we’re doing business as usual, and carrying on in times of crisis, that will set us apart.”
Balancing Loan Demand Against Deposit Costs
An ongoing concern for credit unions is the cost of deposits. Recent NCUA data shows interest expenses quadrupled over the last three years (fig 1.) as credit unions fought for the right to hold members’ money.
Interest income grew by over 60 percent in the same period, but that didn’t result in a sizable net interest margin (NIM) increase. In reality, the NIM percentage relative to average assets saw only a modest increase, as the cost of deposits compressed profitability.
Yes, credit unions are for people, not for profit, but a tighter NIM typically results in a tighter credit box for credit unions, or simply a higher cost for borrowing. So, when demand is high, as it is now, that puts credit unions run at risk of being left behind. But there are other options.
“You can’t take an interest rate to the grocery store,” says iLending’s Nick Goraczkowski. “Most consumers are really just looking for some payment freedom, some financial flexibility. They’re asking, ‘How can I save some money and free up some resources for my family?’”
Goraczkowski’s point is that refinancing collateralized loans—with up to $1.7 trillion on the table in auto alone—can free up the cash consumers need to fill financial gaps elsewhere.
“Our credit union partners have found that these refinance loans perform at a much higher level,” Goraczkowski explains. “You may have a 640 performing closer to a 700, because this is a debt the consumer has already proven they can pay. And all we’re doing is lowering that monthly obligation for them.”
When Mission Meets Moment
Credit unions have the same opportunity—if not an outright obligation—to explore this strategy in education lending, too.
With confusion around the future of Parent PLUS and Grad PLUS programs, and now millions of outstanding federal loans due to be sent to collections, this is a vital opportunity for credit unions to reach out and support new members entering their prime earning/borrowing years; members who are low risk and looking for answers.
And the message from within the system is to do this with gusto.
“Continue moving on these cool things, serving the community,” said Beeler. “Don’t stop being great, because that’s our secret. Don’t jeopardize any of that by pulling back [on services].”
A System Partner
Whatever your credit union’s strategy for managing its loan portfolio while meeting the needs of concerned consumers, LendKey is here to help with solutions that align with your mission and your bottom line.
Reach out to learn more.