CampusDoor’s Sara Parrish: Why the Resumption of Student Loan Payments Matters to Mortgage Lenders
Should the end of the pandemic-related pause on federal student loan payments matter to mortgage lenders? Sara Parrish, President of Incenter company CampusDoor, says “Absolutely yes” in an interview with MBA Newslink.
Sara Parrish is President of Incenter company CampusDoor, one of the nation’s largest third-party student and specialty loan origination platforms. The firm has processed more than $36 billion in student loan applications for over 1,600 unique loan programs. Contact her at Sara.Parrish@campusdoor.com or 717-249-8800 or visit CampusDoor.com.
MBA NewsLink: The beginning of the new school year makes the resumption of student loan repayments a timely general news topic, but where is the direct connection for mortgage lenders?
Sara Parrish: It’s another component of the “perfect storm” affecting many aspiring homebuyers and current homeowners who have student loans. These individuals benefited from a payment pause on their federal student loans during the pandemic. That period is now ending. Interest on their loans will start accruing again this month and payments will resume as early as October. The prospect of integrating these loans back into their monthly budgets, combined with the rise in mortgage interest rates to over seven percent, may deter some borrowers from buying their first home, trading up or investing in a vacation property.
When aware of this challenge, mortgage lenders have an opportunity to keep their customers’ and prospects’ homeownership plans on course and even build a new borrower pipeline. Suggesting, for example, that consumers refinance their student debt could lead to some profitable new business. Many mortgage lenders are entering the student lending/refinance market so they can not only make this recommendation, but support their customers through the process. It’s part of a larger effort to transform themselves from mortgage lenders to financial partners—with a diversified product set that keeps them “sticky” no matter how the mortgage market evolves.
MBA NewsLink: How large is the student loan/refinance market?
Sara Parrish: More than 43 million Americans owe more than $1.7 trillion in federal and private student loans, and their average federal debt load is $37,000. These borrowers span a large age bracket, from younger than 25 to 62-plus.
Among some key segments for those with federal debt: 14.7 million are 35-49, 15.1 million are 25-34, and 7.1 million are younger than 25. Those in the youngest groups are especially attractive to mortgage bankers because of their “stickiness factor”. Their degrees are also likely to boost their additional lifetime earning power.
Some of these borrowers need significant guidance. Not only are they resuming payments; many lost their original student loan servicer and must work with new financial partners. They may not know where to turn and welcome proactive outreach on issues such as refinancing.
MBA NewsLink: What if lenders have never been in the student lending business before? What should they know?
Sara Parrish: First, it can be a profitable strategy even for institutions that are not in a position to hold the loans on their balance sheets—which has been a challenge for non-bank lenders in the past. There are ways to private label refinance services where one partner handles the originations, and a second partner makes a takeout commitment. Some takeout partners are especially interested in private student loans because of their strong repayment records and borrowers’ favorable profiles (e.g., a FICO score of 750 is common).
There are also platforms that automate the student loan refi process—making it easier to get up and running more quickly.
MBA NewsLink: If lenders choose the technology route, what best practices should they incorporate?
Sara Parrish: First and foremost, lenders must put themselves in borrowers’ shoes and exude expertise, confidence, and a commitment to serve. Just like with a mortgage, borrowing for college is a daunting prospect. On average, it takes 21 years to repay college debt. Whether in person or online, lenders must continually educate, inform and reassure borrowers that they have their best interest at heart.
If they’re using technology platforms, the people behind the scenes or staffing their call centers still need a strong underwriting and regulatory background, and a comfort level helping borrowers understand the long-term implications of various refinancing scenarios. The information that borrowers find online or through their phones should also inspire their confidence. FAQs, extensive guidance, and tools that illustrate how loans will impact students’ budgets all help. Once again, they reinforce that lenders are more than product purveyors; they’re general partners advancing borrowers’ lifetime goals.
MBA NewsLink: Any final words?
Sara Parrish: I’m excited about the opportunity mortgage lenders have to advance the American Dream of homeownership in nontraditional ways. Over the past few years, the housing finance landscape has dramatically changed. The fact that we’re even talking about student loans as a catalyst for mortgage lenders’ growth is a reflection of this. We at Incenter firmly believe in the potential of these lenders to emerge even stronger from the current downturn, as long as they embrace their “borrower partnership” roles.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to NewsLink Editor Michael Tucker at firstname.lastname@example.org or Editorial Manager Anneliese Mahoney at email@example.com.)