Student Loan Nightmare: The 15-Year Barrier

NEW YORK (MainStreet) — The Credit Union National Association (CUNA) is proposing that its members be allowed to offer student loans that go beyond the 15-year payoff mark, the current limit for student loans offered by credit unions.

"The 15-year standard student loan made sense in years past when the total debt taken out was much lower," said Paul Gentile, CUNA's executive vice president. "Now students are borrowing more. They need more time to pay off these loans." CUNA representatives met with officials from the Consumer Financial Protection Bureau (CFPB) last month to make the case for the longer loan.

"The value of a longer term is that you can structure the loan to allow for smaller payments in the early years after graduation," Gentile stated. "That is typically when most borrowers struggle—when their careers are just beginning. Once their careers pick up, they are better able to manage the debt, so a longer term helps marry up those two realities." Even if the loan ultimately costs more, a default and its repercussions could become less likely.

Jane Glickman, spokesperson for the Department of Education, acknowledged that the workarounds currently available for federal loans went beyond 15 years; the variety of pay-off scenarios essentially means that there is no hard bench mark in the federal student loan space.

"We have numerous repayment options for federal loans, some extending to 30 years, so there is no real traditional duration," she said. Glickman cited the graduated, extended, pay-as-you-earn, and income-based plans, spelled out at

Except for mortgages, credit unions, whose main regulator is the National Credit Union Association along with the CFPB, primarily make loans with a 15-year term.

Extending the time frame would also let credit unions consolidate multiple federal student loans.

"Given the large dollar amounts likely to be involved in federal student loans," said Gentile, "it would be an advantage if credit unions could offer consolidation loans ranging from 20 to 30 years, also giving borrowers with multiple loans time to pay them back as their careers advance." Gentile said the CUNA was also lobbying to obtain access to the derivative markets as a tool to hedge fixed-rate instruments.