Credit Union Student Loans - Are They Right For You?

Credit union student loans are a great option to help fund your educational expenses. Learn more about what a credit union is, where to get the right credit union student loans, the benefits a borrower can expect to receive with credit union student loans and much more.

Updated by Chandni Agarwal on 18th December 2019

It’s crucial to know where you can finance your education, as while entering graduate school, the cost of college will go beyond your undergraduate degree. 

Federal student loan offers the best interest rates and terms, for most of the borrowers. Private student loans can be the next best option if you fall short of your cost of attendance in federal student loans. 

At instances, if you find yourself in this situation you can consider credit loans besides the loan offered by big banks and online lenders. Not only Credit Union Student loans offer a better overall experience but a competitive term also.

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What are Credit unions?

Credit unions are not-for-profit organizations that serve their members. A member can avail of the wide array of financial services provided, just like the working of a bank, members can make deposits or even take out loans. The loans taken out form the credit unions for educational purposes and expenses are referred to as credit union student loans.

They are similar to private lenders wherein they aren't taken from the government and don't have federal benefits associated with them. CRedit unions function independently and don't have financial motives in mind.

Difference Between Credit Unions and Banks

Credit Unions and Banks provide the same services but have different motives. As banks are for-profit businesses, their No 1 goal is to maximize the profits. 

While on the other hand, Credit Unions are not-for-profit businesses that return the profit to their members in the form of higher saving yields, lower loan interest rates, and better services.

A specific community either regional or organizational is served by Credit Unions. As they are deeply rooted in the community they understand the needs of their members in a better way. They may not be the best option always, but it is worth considering them.

However, you should always remember that before you apply for any student loan or other financial products, you have to become a member of credit unions. Sometimes you may not get qualified based on certain credit union’s eligibility requirements. 


Best places to find competitive credit union student loans

Here are few local credit unions and national credit unions who provide credit union student loans.

1) Credit Union Student Choice

To give you the best offers in your area, Credit Union Student Choice works with hundreds of credit unions.

They ask for your zip code or school instead of providing specifics on your interest rates and other terms and point you to one or more credit unions that can help you.

You can check the credit union student choice’s list of approved schools(link) to see if you are eligible or not.

2) Alliant Credit Union

Student Loans for the undergraduate and graduate as well as consolidation loans if any student wants to refinance after graduation, all of this is provided by Alliant Credit Union, which is based in Chicago.

The variable interest rates as low as 4.56% and repayment terms up to 12 years on its undergraduate and graduate student loans are offered by Alliant Credit Loan, from July 2018.

To borrow from Alliant, the following are some details:

  • A total of $60,000 or yearly $15,000 can be borrowed

  • Up to six months after you graduate, you can opt to defer your payments

  • Alliant doesn’t have any prepayment penalty in case you want to pay your loans early and no application or origination fees are charged by the credit union

Alliant Credit Union student loan’s main drawback is the funding time frame. When you apply for loan funds, it can take up to two months, according to the website. But if you are applying for the last minute, the process can go faster is the clarification by Alliant Credit Union.

Student Loan Refinancing, which is consolidating the private and federal student loan is also offered by Alliant. You can qualify for variable rates as low as 3.50% and fixed-rate starting at 4.00%, as of July 2018. Terms of 5,10,15 or 20 years can also be chosen.

Following are some important information about Alliant’s student loan refinancing program:

  • For undergraduate or graduate student loans, you can refinance up to $100,000

  • You or your co-signer should make at least $40,000 per year and you must be employed for six months or more with your current employer, to get qualified.

Beyond lending student loans, Alliant is a full-time banking service institution.

3) Navy Federal Credit Union

Navy Federal Credit Union student loan can be a good option for the military service member, a veteran, a Department of Defense employee or a family member of a current member, or someone who is eligible.

Both private student loans and consolidation loans are offered by Navy Federal Credit Union. Variable and fixed interest rates on its private student loans that start at 4.96% APR and 6.49% respectively are offered by credit unions.

Here are some of the highlights:

  • School certified cost of attendance is considered when you borrow.

  • A total of 15 years of repayment terms is given, which includes a grace period of five years when you are in school and 10 years as a repayment period. 

  • After 24 consecutive payments, you can submit for a co-signer release if you have a cosigner.

  • Navy federal doesn’t have any application or origination fees or prepayment penalties.

  • If you opt for the autopay option, you can qualify for a 0.25% discount.

Compared to the competition, Navy Federal does not have any other financial products to stand out. But credit union offers some special discounts and deals to its members, which includes:

  • Up to 20% off on Hertz rental cars

  • A special discount on GEICO auto insurance

  • When you buy or sell your home with RealtyPlus, you can get a cashback up to $5,050

  • If you are an active duty or retired member then an extra loan discount rate is given.

You may not qualify for Navy Federal, as the eligibility requirements are strict. But if you qualify, the discount with membership and the credit union’s dedication to the military community may make it worthwhile for you.


Benefits of Credit Union Student Loan

Many of the features are offered by private lenders and credit unions for the loans provided are similar. There are some credit unions that allow you to make low payments (or no payments) while in school. By setting automatic payments you can also reduce your interest rate.Following are some Benefits of Credit Union Student Loans:

1) Lower your interest rates

Credit Unions can offer competitive interest rates to borrowers, even if it is smaller than national banks. Credit Unions can offer loans at cheaper rates, as it is a nonprofit organization.

Alliant credit union offers student loans with interest rates as low as 3.96% whereas Discover student loan rate is 4.62%, from March 30, 2018.

It is not necessary that every credit union will always have a lower interest rate than big banks or online lenders. You will need to compare all the different types of private loans. But you can the better deal of credit unions.

2) Better Customer Service

Customer is treated fairly, as Credit Unions are member-oriented institutions. The board of directors to run the organization is voluntarily elected by the members. That means you can know how things are managed.

Credit unions know they have to survive, so they treat their customer’s right to survive, as they aren’t big enough. 

But we can’t say that every union is perfect. You can check the reviews on the Financial Protection Bureau’s complaint database and on the better Business Bureau, Before joining anyone.

3) Often more Relaxed Lending Standards

When applying for private students loan your credit and income matters, unlike in federal student loans. Usually, a co-signer is needed to get the approval of your private loan if you don’t have a good credit score or a steady income as proof.

Like other loan lenders, your credit and income will also be considered by the credit union when you apply for a loan. The lending standards may not be as strict when you or your co-signer are members of the credit unions or have an established relationship.

When big banks deny you, there is a chance you might get approved of your loans. Or you can also get better rates when the credit unions consider your existing relationship into accounts.

4) Better Banking

Lower fees, better services, and underlying satisfaction can be felt when you opt for credit unions. 

Since the Digital Federal establishment, our families are using the same service as they have treated us well, consistently matched the rates and services of national banks and expanded their business in our area. Naturally, with all these benefits anyone can be inclined towards there services. In the past five years, the Digital Federal’s student lending portfolio grew from $4 million to $100 million.

As the mutual attraction between the students and their credit union is growing. The two options for two student loan services should be considered: Student Choice and CU Student Loans.

5) All other options Exhausted

Sometimes, Private Student loans may become necessary, when it comes to funding for education. One should consider applying for private loans, only when all the other resources like loans, grants and scholarships.

 


Drawbacks of Credit Union Student Loan

The following is the disadvantages a borrower with credit union student loans will face 

1) You must be a member of the credit union you wish to take a loan from

You must be a member of credit unions to use their services. To become a member you may be required to make a small donation to a charitable organization by many credit unions. Others might only accept members who live in the given area, work for a specific employer, or are affiliated with a particular school, labor union or a particular group.

You may be required not just to become a member but to have other products with them, like checking accounts by some credit unions. Meeting these requirements may be inconvenient until you want to start a full-time banking relationship with credit unions. 

To find out the membership requirements you can use MyCreditUnion.gov(link) to research credit union in your area.

2) Finding a credit union student loan can be challenging

Nowadays everyone has heard about big banks that operate in every state. But finding the best deal on the loan can be a big challenge, as credit loans are spread across the country.

The kind of loans you are looking for is not always offered by credit unions. Some of the credit unions don’t offer student loans at all. Or else they limit the loan option to undergraduates or refinancing loans. 

Services such as Lendkey allows you to shop for loans among much different credit union and community banks. The process is simplified and easy to find a credit union to borrow from.

3) Doesn’t provide the same perks as other private lenders

Credit Unions may not match the revenue and the customer base to support special programs like that of big private lenders. 

For example, private lender CommonBond offers the CommonBridge program, If you are unexpectedly unemployed then it can help you earn extra income. You can earn professional experience and a little extra income if it matches members with the consulting opportunities at CommonBond.


Are Credit Union Student Loans right for you? 

There cannot be any right answer to this question. Whether you qualify or not is the biggest consideration in the credit union. Even you do, you have to compare the credit union’s interest rates, fees, and other features to the top private student loan companies.

Assistance while getting credit union student loans

Like a regular loan when you get a loan from a credit union you will undergo a number of process to be handled, assistance will be provided even through the form of a third party.

Student Choice

StudentChoice.org is a servicing organization by credit unions to handle things like origination, processing, school-certifications, disbursement, and servicing. Credit Union directly provides rates, approvals, and underwritings. Through your academic career, your loan is issued through a line of credit that can be revisited. 

StudentChoice.org will handle your money coming from the credit union, customer support, and account management. With clear language around terms and conditions, and for scheduling bill payments, the result is an easy to use interface.

Alternatives to a credit union student loans

If you can’t get a credit union student loan here are some alternatives to explore - 

CU Student loans

CU Student loans can be considered when you currently don’t belong to the credit union but want to use one of your student loans. CU Student loans concentrate the students lending across over 100 credit unions whereas Student Choice is a service used on behalf of your particular credit union.

Highly Rewarded are given to Good Credit and Academic Standings-

For determining rates, CU students use their own formula. You don’t need a co-signer if you a student with a good credit history. You may qualify for lowest rates available through CU student loans, who issue rates as low as 3.47 % by their own formula if you have a good GPA.

After all your efforts, you may have a better chance of picking the best lender who offers you the best combination of the features you needed.