A game-changing student lending program with zero delinquencies

Manchester Municipal Federal Credit Union (MMFCU) in Connecticut has achieved what many financial institutions only dream of—a 14-year student loan program with zero delinquencies and zero charge-offs.  

By emphasizing immediate repayment, personalized education, and community trust, MMFCU has not only helped families afford higher education but also fostered long-term financial health for its members.

Addressing a community need

As the credit union for municipal employees in Manchester, MMFCU has deep roots in the community it serves. In 2010, CEO Lori Herrick and her team identified a recurring problem: many of their members, often first-generation college families, were struggling to finance their children’s education. Traditional options like personal loans, home equity loans, and federal loans were either unattainable or left families saddled with high-interest debt that grew exponentially over time.

Recognizing this gap, MMFCU launched its own student loan program. The program was designed from the ground up with unique features to protect members' financial well-being. By requiring immediate repayment and co-signers, the credit union eliminated deferment—a common feature in federal loans that often leads to unmanageable debt accumulation. Parents make affordable monthly payments while students are in school, and after graduation, the loan transitions to the student, fostering accountability and financial literacy.

“The difference between deferring and not deferring … ends up being thousands and thousands and thousands of dollars of accrued interest,” according to Herrick.

Real results for families and the credit union

The program’s impacts have been profound. MMFCU members benefit from clear, manageable repayment terms that prevent the snowballing interest often associated with deferred loans. Herrick noted that many students and parents leave the credit union better educated about their finances.  

“It’s an eye-opening experience for students,” she said. “They know exactly what they borrowed and what they owe. That level of awareness is rare with traditional loans.”

The benefits extend beyond education. MMFCU’s younger members often turn to the credit union for other financial needs after graduation, including car loans, savings accounts, and direct deposit services.  

Today, the credit union has approximately $3 million in student loans on its books, and these borrowers collectively contribute an additional $1 million in other loans and monthly deposits—a testament to the program’s success in building lasting member relationships.

Overcoming early challenges

The program wasn’t without its hurdles. Early on, regulators were skeptical, Herrick said. Examiners questioned whether the loans were too similar to personal loans and scrutinized the program’s potential risks. However, as Herrick points out, consistent performance spoke volumes. After four years with no delinquencies and no charge-offs, the scrutiny eased, and MMFCU’s innovative approach earned quiet acceptance from regulators.

“Our success is rooted in education,” said Herrick. Parents and students not only understand the loan terms but also actively manage the debt together, often with students making payments during summer breaks. This hands-on approach has kept repayment issues at bay and prevented the “out-of-sight, out-of-mind” mentality that often plagues deferred loans.

A model for other credit unions?

Herrick believes the program could become a game-changer for credit unions nationwide, particularly if private student loans receive government backing, as proposed in recent legislation.  

“We’ve proven that student lending can be a win-win for both members and credit unions,” she said. “I just think that would be such a game-changer for credit unions to be in this space.”

A legacy of financial empowerment

Fourteen years in, MMFCU’s student loan program is not just a financial product—it’s a tool for empowerment. By helping families navigate the complexities of higher education financing and fostering financial literacy, MMFCU has cemented its role as a trusted partner in its members’ lives.  

As Herrick reflects on the program’s impact, one thing is clear: this small credit union has achieved something extraordinary, one loan at a time.