What student debt means to you, the community banker.

As you probably know, just a few weeks ago, the Supreme Court struck down President Biden’s proposed forgiveness program for federal student loans. What you also probably know is that the soaring cost of higher education has left many young individuals – and many of them, your customers – grappling with the burden of student loan debt.

When I say “soaring costs,” this is what I’m talking about. Here’s a 1981 NY Times article entitled (and this says it all), “The $10,000-a-year college tuition has arrived.” One institution cited as an example is Fordham University in New York. “At Fordham University, which has announced 13 and 14 percent increases in tuition, a demonstration was held recently on the Bronx campus, where total fees will go from $3,750 to $4,240.” What’s the annual tuition in 2023 for an in-state student? With a 43% increase over the past decade, the cost of attendance is now $55,700. If only wages increased at the same pace…

According to educationdata.org, the average monthly student loan payment is $503. Experts are saying, and this makes sense, that many students have been taking advantage of the COVID forbearance, which means that come October, those students will begin making payments for the first time in years. This can be problematic as, for many, getting back into repayment mode will mean making some lifestyle, and spending, adjustments.

American Bankers recent article, “These banks help employees with their student loans. More could follow,” points out what the larger banks are doing in response: Offering various types of financial assistance to employees. “Assistance with student loan repayment isn't the norm in the banking industry. But some large financial institutions do offer to cover part of borrowers' monthly payments — or provide one-time payments to reduce principal balances.”1

Helping employees with their student debt is one thing… helping customers is another, which I believe, presents an opportunity for smaller banks. As these young Americans embark on their professional journeys, community banks have a unique opportunity to step in and provide valuable assistance. 

Known for their local presence and personalized services, community banks can play a vital role in helping these younger customers navigate the challenges posed by student loan debt. By offering tailored financial solutions, educational resources, and debt management strategies – and if possible, products that may help them lighten their debt load – these banks can empower their young customers to achieve financial stability and thrive in the long run. Remember, young customers are your future business, and earning their loyalty now could very well gain you a customer for life… one who will, over the course of a lifetime, buy multiple vehicles, homes, and investment products, among others. Some may even start a small business that grows into a big one. In short, you need to earn their business, and their trust, now.  

“Community banking is fundamentally relationship-driven and small banks excel at relationship building. Student borrowers could embrace the level of personal attention and service that are hallmarks of community banks. Ample research points to the Millennial preference for personalized experiences and to their antipathy toward large institutional banks.”

  • Deluxe.com. “Do Student Loans Hold Opportunity for Community Banks?”


Customized Financial Solutions

One way community banks can assist young customers with student loan debt is by offering customized financial solutions. These banks can provide low-interest refinancing options tailored specifically for student loans, allowing borrowers to consolidate their debts and potentially lower their monthly payments. By refinancing, borrowers may also benefit from reduced interest rates, saving money over the life of the loan.

Additionally, community banks can create special savings or investment accounts designed to help customers pay off their student loans faster. These accounts can offer higher interest rates or unique incentives, such as matching contributions, to encourage disciplined saving and accelerated debt repayment.

Educational Resources and Financial Literacy Programs

Community banks can go beyond financial products and services by offering educational resources and financial literacy programs to help their younger customers manage their student loan debt effectively. These resources can include workshops, seminars, or online tools that provide guidance on budgeting, debt management, and long-term financial planning.

By partnering with local educational institutions and organizations, community banks can host financial literacy events or invite guest speakers who specialize in student loan management. This collaborative approach allows young customers to gain a comprehensive understanding of their student loan options, repayment strategies, and how to build a strong financial foundation for the future. At the same time, this builds a strong relationship between the younger customer and their local bank.

Debt Management Strategies and Counseling

In addition to providing financial solutions and educational resources, community banks can offer personalized debt management strategies and counseling services. These banks can assign dedicated advisors or loan officers who specialize in student loan debt to guide customers through the repayment process.

Loan officers can work closely with borrowers to create manageable repayment plans, explore loan forgiveness or discharge options, and identify potential avenues for reducing their debt burden. They can also assist customers in understanding the implications of different repayment programs and provide insights on how to make informed financial decisions.

What does it all mean?

Community banks have a significant role to play in supporting their younger customers burdened by student loan debt. By offering tailored financial solutions, educational resources, and personalized assistance, these banks can empower young individuals to navigate the complexities of student loans, achieve financial stability, and build a brighter future.

About Bank Marketing Center 

Here at bankmarketingcenter.com, our goal is to help you with that topical, compelling communication with customers; the messaging — developed by banking industry marketing professionals, well trained in the thinking behind effective marketing communication — that will help you build trust, relationships, and revenue. Like these campaigns, for instance, designed to help you get the message out to those younger customers who carry student loan debt.

To view our marketing creative, both print and digital – ranging from product and brand ads to social media and in branch signage – visit bankmarketingcenter.com.  You can also contact me directly by phone at 678-528-6688 or via email at nreynolds@bankmarketingcenter.com. As always, I welcome your thoughts.

1American Banker. These banks help employees with their student loans. More could follow. July 11, 2023.