With cuts to OSAP and student debt rising to unprecedented levels, the University of Toronto and student groups—including the UTMSU—should move to establish a credit union to provide an alternative and innovative way to alleviate the monetary needs and wants of students.
In Canada, credit unions are largely under the jurisdiction of provinces. They offer similar services as banks, such as checking and saving accounts, loans, investments, and financial aid. Unlike banks, credit unions limit their offerings to specific areas or professions. This distinguishing feature allows a credit union to owe its allegiance solely to its members rather than detached shareholders.
This allegiance translates into substantial benefits for the students: instead of facing banks which seek to wrangle profit, students will be given a far better deal. Credit unions can offer substantially lower fees and more efficient savings accounts than banks. In addition, deposits in banks are only insured for up to $100,000—deposits in credit unions are insured by the province of Ontario for up to $250,000.
According to The Motley Fool, a financial services company that provides financial advice for investors, credit unions suffered “one-fifth the failure rate of other banks during the financial crisis of 2007-2008.” They also are more trusted by the public than banks.
Luigi Zingales, a professor at the University of Chicago, argues that this trust “is not just because of the not-for-profit motive of credit unions. People trust more local than national banks and trust more credit unions than local banks. The more local an institution is, the more trusted it is.”
We need look no further than Georgetown University to see a student-run credit union in action.
Founded in 1987, Georgetown University Alumni & Student Federal Credit Union (GUASFCU) received $100,000 from the university administration and over 30 years has grown to hold more than 16 million dollars in assets. The GUASFCU offers savings accounts, checking accounts, and certificates of deposits. In addition to providing traditional financial services, they provide grants of up to ten thousand dollars for innovative campus projects and organized seminars for students on financial literacy. According to the GUASGCU, over 60 per cent of Georgetown students choose to pay into the union. Georgetown is not the only university to possess a student-run credit union. The University of Pennsylvania and Miami University also have student-led credit unions.
The establishment of a credit union at U of T would also work towards satisfying the U of T administration’s goal of providing more experiential learning, as well as bring together students from all fields in pursuit of a common goal.
CCIT students can help with communications and promoting. Management and commerce students can assist with the running of the union itself. Political science and law students can help research the rules and regulations. Computer science students can provide assistance with the digital platform and help with security.
As a leading institution in Canada, it is our responsibility to set the trend. Armed with the precedent of UPENN and Georgetown, U of T should take the bold step of moving forward with progress. Of course, there is no need to limit the project to just U of T. A tri-campus banking system would do wonders to unify students across all three campuses in collaborative engagement. In the long term, the credit union can expand its operations to provide funds to cash-strapped clubs and societies that are suffering from opt-out fees.
