Graduates in health care fields can now turn to NIH Federal Credit Union to consolidate private student loans. The Rockville-based financial cooperative, which serves the biomedical industry, has dubbed the new effort its Careerbuilder Education Refinance program.

The initiative arrives amid ongoing discussions within government agencies and on Capitol Hill about the threat of mounting student debt. Americans owed $904 billion in student loans at the end of March, an increase of $663 billion since 2003, according to the Federal Reserve Bank of New York. In that time, delinquency rates for education loans climbed to 8.7 percent from 6.1 percent .

Private student loans are especially notorious for high interest rates and minimal borrower protections, yet have become popular as tuition climbs. Private lenders have been slow to consolidate these loans at lower rates, but a growing number of credit unions are now offering the service.

“When the asset-backed security market shut down in 2008, a lot of big lenders lost the ability to securitize student loans and pulled out. Credit unions stepped up as a new source for lending and refinancing,” said Jim Merrill, a senior vice president at Fynanz, a New York-based provider of Web-based student loan products for credit unions.

At NIH Federal, officials conducted a focus group study to gauge member concerns and found a majority were struggling to repay debt tied to their education, chief executive Juli Anne Callis said.

Private student loans are especially notorious for high interest rates and minimal borrower protections, yet have become popular as tuition climbs. (Dayna Smith/For The Washington Post)

“You had these very educated and skilled professionals whose financial health wasn’t optimized,” she said. “By giving them a longer term at a lower rate, over the whole life of the loan they can save significant money.”

Under the program, borrowers can refinance private loans up to $25,000 at rates as low as 4.99 percent, depending on credit score and the size of the loan. Variable and fixed-rate options are available. Borrowers cannot have any outstanding judgments or be delinquent on their loans.

Callis said NIH Federal can refinance up to $100 million worth of student debt, or 20 percent of its loan portfolio. She is well aware of the perception that student loans can be high-risk products, but believes “the methodology of the program is extremely prudent.” The size of the loans, she added, also limits the risk.

NIH Federal, despite offering the consolidation program, does not originate student loans. Callis said the credit union, with $559 million in assets, is not large enough to take on the risk of underwriting student loans on its own. Yet NIH Federal would consider education lending within a consortium or a credit union service organization.

There is no definitive data on how many credit unions offer student loan consolidation because regulators do not require disclosure.

Fynanz, for its part, has 101 clients providing the service. Merrill said the company, founded in 2008, added its refinancing platform a year ago.

“We’ve seen about an 85 percent penetration rate among new clients for both the in-school and consolidation product,” he said. “It’s something that most new clients see the value in because it can help members improve their financial health.”