Could New Fed Rules Help Generate CU Student Loans?

By Roy Urrico

Major federal student loan changes, which took effect July 1, 2026, as part of the One Big Beautiful Bill Act, introduced new borrowing restrictions and reduced repayment plan choices. The changes may generated new opportunities — and risks — across the consumer lending landscape that includes credit unions and other financial institutions.

Josh Turnbull, SVP, Consumer Lending Business Leader at TransUnion.

“With the July changes that came about as part of recent legislation, there's some fairly decent structural changes in terms of caps that ultimately create an opportunity for non-federal student lending,” said Josh Turnbull, SVP, Consumer Lending Business Leader at the Chicago-based information and insights company TransUnion.

Turnbull sat down with Finopotamus to discuss the potential implications of the new federal student loan policies for credit unions, banks and other lenders; and how the new rules could influence consumer credit and household finances.

Here is a rundown of the new student borrowing limits:

• Graduate loans. Capped at $20,500 per year with a $100,000 aggregate limit for standard graduate degrees, and $50,000 per year with a $200,000 limit for approved professional programs.

• Parent PLUS loans. Restricted to a maximum of $20,000 per year and $65,000 total per dependent student.

• Grad PLUS loans. Totally removed for new graduate and professional borrowers as of July 1, 2026 (with limited exceptions).

• Lifetime caps. A combined lifetime federal borrowing cap of $257,500 for new borrowers amassing undergraduate and graduate debt.

• Part-time proration: Part-time enrollment proportionally reduces annual loan eligibility borrowing capacity in direct proportion to the number of credits taken compared to a full-time schedule.

As a result of the changes student lending is really entering a new chapter, Turnbull told Finopotamus. “There's real opportunity for private lenders who aren't bound by some of the structures of the federal programs to jump into the fray there and finance those types of programs. From a credit union/lender standpoint, the biggest opportunity here is really how we serve consumers/students who are looking to finance education given some of the caps that have come into place.”

Private Lenders May Benefit

“Student loan debt remains the third-largest category of consumer debt in the United States, totaling approximately $1.6 trillion (as of the second quarter 2026),” said Turnbull. He explained nearly 95% of that balance is federal student loan debt, meaning changes to federal lending and repayment policies have the potential to significantly influence how students and families finance higher education.

“It's different versus underwriting a mortgage, a credit card, an auto loan,” said Turnbull. “Because most of the time (you’re) underwriting someone with very limited income with a certain credit profile with the hope that upon matriculation that earning is going to materialize in a different way than it looks today.”

Private lenders may benefit in several areas per TransUnion research. More than 10% of federal student loan borrowers currently carry balances exceeding $100,000, highlighting potential funding gaps as federal borrowing limits take effect. In addition, refinancing activity may increase as borrowers reassess repayment strategies under evolving federal programs.

The average federal student loan balance among borrowers in repayment is now nearly $37,000 and continues to rise, revealed Turnbull. “However, lenders should approach growth opportunities with caution. Elevated federal student loan delinquency rates suggest borrower stress remains significant, particularly among below-prime consumers.”

Disciplined Underwriting

While there are meaningful growth opportunities for private lenders, it also raises the importance of disciplined underwriting and effective risk management, advised Turnbull. “With roughly 30% of federal student loan borrowers in repayment being delinquent, lenders cannot assume rising demand will translate into profitable growth. Success will depend on identifying consumers with both the willingness and capacity to repay.”

Regarding existing student debt loads: “Student loans (debt) are about $1.6, $1.7 trillion dollars. right around the same amount as auto lending. it's a huge category and I think oftentimes gets overlooked in terms of the total size of the debt that is carried by the consumer population,” said Turnbull.

“There used to be a number of ways that people could repay federal student loan obligations,” emphasized Turnbull. “Those lanes have narrowed quite a bit to just a couple of options now. One is income-based, for folks who are done with schooling. The underwriting there, the risk management practices are all much more familiar to a credit union.”

Turnbull continued, “The bigger opportunity probably is someone who has finished a four-year program, is going into a Ph.D. program or some kind terminal degree, that is going to incur a fair amount of debt. That opens up an opportunity for a credit union or bank to say, ‘Is that something that we want to get into?’ There's a big difference between giving someone 50,000/$100,000 loan to finance a program where it is very clear what the path is and what the likely earning is on the backside versus someone financing something where there's lower earning potential.”

Risk Assessment

The contrast with other unsecured lending products exemplifies the value of robust risk assessment. According to Turnsbull, while both federal student loan borrowers and unsecured personal loan borrowers tend concentrate in below-prime credit tiers, the consumer-level 90-plus day delinquency rate for unsecured personal loans remains approximately 3%, compared with roughly 30% for federal student loans.

This gap underscores the importance of leveraging data and analytics to distinguish borrowers experiencing temporary financial pressure from those facing more persistent repayment challenges, suggested Turnbull. “Alternative data can further strengthen underwriting by providing additional visibility into financial capacity, income potential, and payment behavior.”

For students and families, the changing federal lending landscape underscores the importance of evaluating all available financing options and understanding how each may affect long-term affordability, held Turnbull. He further explained, building the right mix of federal and private student loans – which currently stands at about 7% of borrowers with both federal and private loans – can help close funding gaps while balancing repayment flexibility, borrowing costs, and future credit and financial goals.

“Ultimately, as more education-financing demand potentially shifts toward private lenders, the competitive advantage will belong to institutions that can grow responsibly. The combination of viewing financial data over time, alternative data, and a comprehensive view of the consumer can help lenders identify sustainable growth opportunities while maintaining strong credit performance,” said Turnbull.

Lenders seeking to stay fully abreast of the true risk of the student loan borrowers in their portfolios can leverage TransUnion’s TruVision Premium Student Loan Attributes as part of their regular portfolio reviews. “There are a lot of capabilities that we have developed to help lenders understand who has student loans now, how they're performing (and) to understand how consumers' financial pictures are changing over time,” maintained Turnbull.