Banking your way to lower tuition

It is a scene that is repeated over and over again in Orthodox Jewish households in America. Sifting through the mail, you catch sight of an envelope bearing a familiar logo and you feel your stomach sink. With dread, you slit open the envelope, not wanting to know just how much higher your yeshiva tuition will be for the coming year.

While the economy is said to be slowly recovering, tuition at most yeshivas and day schools has gone up for the 2010-2011 school year and more and more families find themselves unable to pay. An informal survey of a number of yeshiva administrators and board members by The Jewish Star found that many schools are receiving even more scholarship applications for the coming school year than in the past. At the Eliezer Project, a Five Towns-based organization that provides financial guidance to families that have lost income in the recession, an official reports that new requests for help arrive weekly. As people deal with reduced incomes, they find themselves unable to deal with their tuition bills, which grow larger each year. The situation seems hopeless.

Unless you speak with Judah Libin, a technology consultant who lives in Woodmere, and believes that the solution to the crisis over yeshiva tuition lies with credit unions.

Credit unions are government insured financial institutions that serve groups of people who share a common interest, Libin explained. At a convention two years ago, he said, a flash of inspiration seized him: Weren’t yeshiva parents a group of people who shared a common interest? Why couldn’t credit unions be used to help parents pay their yeshiva tuitions?

Credit unions function much the same way that banks do, but they are not-for-profit institutions that are tax exempt. Depositors at the credit union are not customers, but members, who have voting rights. Credit unions exist to benefit their members, are insured by both the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Secondary Insurance Fund, and offer the same services banks do, such as savings and checking accounts, credit card processing and originating and servicing loans. Both can be very profitable if run properly, but while a bank’s surplus goes to its owners, a credit union’s surplus is generally used to underwrite the cost of the services offered. In the case of Libin’s proposed Yeshiva Credit Union, each member’s share of the surplus would go directly to the yeshiva of his choice to help defray the member’s tuition bill.

“I know this model works,” said Libin. “The Mennonites in Pennsylvania are doing the exact same thing and many credit unions have told me they don’t understand why the Jewish community hasn’t taken advantage of the benefits that credit unions have to offer.

With seven years of experience writing information system software for credit unions and three children in the yeshiva system, Libin has practical experience with and firsthand knowledge of both factors in this equation.

Libin hopes the Yeshiva Credit Union will be fully operational by January. He has received resumes from people who previously held high-profile jobs in the financial industry and are currently unemployed, and is assembling a team that he said would provide credit union members with the exact same services they receive from their bank.

In fact, just about the only thing about the banking experience that would change for Yeshiva Credit Union members would be that the credit union would give them their share of the credit union’s surplus to apply towards their tuition.

Historically, credit unions have been very successful at providing their members with great savings. Bethpage Federal Credit Union, founded in 1941 to service employees of Grumman Aerospace Company, originally operated out of the trunk of a car. Today it is one of the largest credit unions on Long Island, with 151,933 members and assets of $3.2 billion.

“Today’s financial situation is worse than ever and more and more people are feeling the pinch. People simply cannot pay their tuition bill. Something has to change,” Libin said.