Private Student Loans

Credit Union Student Loans: Find Your Lowest Rate

If you’re considering a private student loan to finance your education, check out credit union student loans. Unlike traditional banks, credit unions are nonprofit organizations, which could mean a lower interest rate for you.

According to financial aid expert Carol Stack, co-author of The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford, “Credit union loans generally offer better terms than loans from banks. As non-profit cooperatives, credit unions operate with lower margins than banks that have to return shareholders’ investments.”

Because of their not-for-profit status, credit unions can also be more flexible regarding who they lend to. With a credit union, you might find it easier to qualify for a student loan.

How credit unions work

Like banks, credit unions provide a wide variety of financial services, including student loans. Says Stack, “Credit unions are becoming more well-known and widely used for all kinds of financial transactions.”

Unlike banks, credit unions are membership-based. That means they serve people with specific connections. This can include where you work, live, or go to school.

There are also credit unions for those serving in the military and their families, like the Navy Federal Credit Union. You must become a member to get a student loan through a credit union.

Credit union student loan partners

Credit unions often partner with student loan lenders, such as LendKey. Founded in 2008, LendKey is an online marketplace lending platform that connects student loan borrowers with credit unions offering student loans for undergraduates and graduates. Lendkey operates in 45 states (and Washington, DC).

LendKey has a two-minute rate check tool that accesses 265+ not-for-profit and community lenders without impacting your credit score. There is no application fee. You can borrow up to the cost of attendance for your school.

Other student loan lenders associated with credit unions include Everence, a faith-based credit union of the Mennonite Church. The Great Lakes Credit Union is another student loans lender that operates in two states. Not every credit union provides student loans.

Credit union student loan refinancing

If you have existing student loans and would like to lower your payment and interest rate, you may be able to do so through credit union student loan refinancing.

For example, the benefits of refinancing through LendKey are many. The company allows you to refinance federal and private student loans, including graduate loans, into one new payment with a lower rate.

When you refinance student loans through LendKey, the credit unions the company works with don’t charge you any origination fees. With a student loan refinance through LendKey, you can often choose from various repayment options. This includes interest-only repayment for the first four years.

Keep in mind that, while you usually have a grace period before you have to pay off a credit union loan, you lose some other benefits found in federal loans, such as loan forgiveness.

Steps to applying for a credit union student loan

If you decide to get a new student loan or refinance an existing one through a credit union, you’ll have to become a member. This requires you to have an affiliation with the credit union through your school, work, religion, or region.

With some credit unions, you may have to pay a small membership fee. You’ll also probably have to set up a checking or savings account with the credit union and make a deposit.

During the application process, you’ll need to provide proof of income and consent to a full credit check.

Do you need a co-signer for a credit union student loan?

It’s not a necessity, but if you don’t have much credit and a fulltime job, it’s a good idea to get a co-signer for your student loan. A co-signer can help ensure that you qualify for a credit union student loan.

You may also qualify for a lower interest rate when you have a co-signer. After you’ve paid on a credit union student loan for a specified period, you can often get a co-signer release.

Credit union student loan limits

Credit unions are smaller lenders when compared to a major bank. That means student loan refinancing usually isn’t their only service. The credit unions often have limits on how much credit they will provide. You may also find that credit unions have more limited repayment terms than other types of lenders.

Are you borrowing too much in student loans?

If you want a credit union student loan because you’ve used up your federal student loan money, Stack suggests assessing your finances. She says, “If this loan is in addition to federal loans, which raises a red flag about the amount of debt you’re taking on.

I’m a strong advocate for limiting the amount of undergraduate debt to what we call the $8,000 debt challenge. That means no more than $8,000 per year for four years for an undergraduate, or $32,000 total.”

Do your homework

Just as you do your homework for class, it also pays to do your research when getting a credit union student loan. Says Stack, “Like anything financial, it’s important to never assume—even with credit union student loans. Before signing, always compare credit union student loan rates and terms with other loan options.”

Head over to SuperMoney’s private student loan page to review and compare top lenders today.