The deal with the Harvard University Employees Credit Union will allow eligible Harvard graduate students to borrow a maximum of $250,000 for their education without a co-signer—a safety net required by many lenders. Discussions with HUECU have been ongoing for the past six weeks, and the recently completed contract will take effect on April 23 for the next three years.
The arrangement—which marks the first time that HUECU will be offering student loans—follows a similar deal penned in February with JPMorgan Chase and will increase the funding options available to international students.
After Citibank abruptly pulled out of previous custom loan arrangements with Harvard and several other universities in October, Harvard administrators were left scrambling for alternative ways to help students cover the cost of attendance while maintaining the University’s commitment to financial aid across the graduate schools.
“Our overall objective is to ensure that a Harvard graduate education remains accessible to talented students regardless of where they live,” Harvard’s Chief Financial Officer Daniel S. Shore said in a statement yesterday.
Citing the historically higher probability of default by international students compared to American students, a Citibank spokesman said at the time that the frozen credit markets caused lenders to shy away from issuing high risk loans.
HUECU president Eugene J. Foley acknowledged that the credit union will likely see higher default rates on international student loans.
But because the credit union—unlike commercial banks—is a not-for-profit organization, profit maximization for shareholders is not a primary concern.
As a result, the credit union is able to offer more competitive rates and arrangements for borrowers.
“Everyone shares profits equally through lower rates,” Foley said, explaining that the credit union acts in the interest of all its members.
Harvard administrators are not negotiating with any other lenders at the moment, University spokesman Kevin Galvin said, as the graduate schools have already begun to accept students for the next academic year.
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