Devin Hughes is director of business development for LendKey, which connects student loan borrowers with credit unions. He says, “Refinancing your student loans with a credit union can save you a lot of money.”
But is credit union student loan refinancing right for you? Let’s take a closer look.
Benefits of credit union student loan refinancing
A credit union is a not-for-profit financial cooperative owned by its members. Says Hughes, “A credit union’s goal is to pass profits on to the member. The company does this by offering low-interest rates and low or no fees.”
Say you have $25,000 in student loans with an interest rate of 6% and a term of 15 years. If you were to refinance to a 4% interest rate and a term of 10 years, you would save $7,600 over the life of the loan.”
Hughes provides an example of potential cost savings when you refinance to a lower interest rate.
“Say you have $25,000 in student loans with an interest rate of 6% and a term of 15 years. If you were to refinance to a 4% interest rate and a term of 10 years, you would save $7,600 over the life of the loan.”
Besides offering low interest rates, a credit union can also provide the same financial services that a traditional student loan refinancing company does, with added benefits.
Says Hughes, “As a member of the credit union, you aren’t just an account number or a set of financial documents. You’re an owner and are treated as one. Credit unions are known for their high level of personalized customer service.”
Shopping for a credit union student loan
If you belong to a credit union, contact the credit union to see if the company offers student loan refinancing. If the credit union doesn’t, or you want to check for the lowest rate, check out LendKey.
According to Hughes, “LendKey connects student loan borrowers with more than 250 credit unions across the United States. You can check your rates at LendKey in just two minutes, without affecting your credit score. After entering some basic financial information, you can browse loan offers from several of LendKey ’s credit union partners.”
While LendKey doesn’t make loans, the company does handle nearly every other aspect of the process. Says Hughes, “Borrowers apply and make payments through LendKey. The company helps with any problems or questions borrowers have.”
LendKey also has a calculator on the website that allows you to see how much you can save when you refinance your student loans with one of their credit union partners.
Can I refinance part of a student loan?
If you choose to refinance a student loan, you must refinance the entire amount of that loan. It’s not necessary to refinance all of your student loans, though.
Consider the drawbacks of credit union student loans
Federal student loans come with certain protections. These include student loan forgiveness, which you can get if you work for a government agency or qualifying nonprofit for 10 years.
You also give up the opportunity to apply to one of four income-driven repayment plans. These plans reduce your monthly payments to a portion of your income, making it easier to pay.
With these plans, if you still have a balance when your repayment period ends, the rest of the loan is forgiven. Not everyone qualifies for these special benefits, however.
If you doubt that either of these circumstances would apply to you, you’re better off consolidating your student loans. This will save you interest and give you just one payment to remember each month.
Before applying for a student loan refinance, look at how much time you have left to pay off the debt. If your student loan is within a year or two of being paid off, refinancing and extending the life of the loan may not be a good idea.
You might get a lower interest rate, but you’ll end up paying more interest in the long run.
Ready to save money on student loan interest?
Saving on interest allows you to pay off your student loans faster. Rather than wasting good money on high interest rates, why not look into credit union student loan refinancing?
Check out SuperMoney’s student loan reviews & comparison page to compare top lenders side-by-side and find the best one for you.
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.