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For Private Student Loans, Consider Credit Unions

There was a time when your summer job could let you pay for college tuition on your own, and your part-time gig near campus would cover living expenses like rent, food, and gas.

In today’s reality, an independent student simply cannot earn enough to make ends meet without substantial financial aid. Even then, the balance of tuition, fees, and living expenses might exceed your financial aid allotment.

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So where do you go?

Private student loans are a hot market, and as a prospective debtor your more likely going to try to find a lender who not only have decent rates, but is also someone you can trust. Enter the credit union.

No doubt, there’s a lot to love about credit unions. Lower fees, better service, and that underlying satisfaction that comes from knowing they aren’t out to screw you.

Our family has been using the same credit union, Digital Federal, since it’s inception. They’ve treated us well, consistently matched or beat the rates of national banks, and continue to expand their services in our area. Naturally, when it was time to find private lending options for a student loan, I was inclined to seek out their services first. Apparently, I wasn’t alone. Digital Federal’s student lending portfolio grew from $4 million to over $100 million in the past five years.

So with a growing mutual attraction between students and their credit unions, we should take a look at two of the larger options available through two student loan services used by credit unions: Student Choice and CU Student Loans.

Before we dive into these, we’d be remiss if we didn’t emphasize only using private student loans as a last resort.

You’ve exhausted all other options

When it comes to funding your education, there may be a time when a private student loan is necessary. When we say necessary, we mean it! Only after the following resources are exhausted should one consider applying for private loans:

  1. Federal Grants and Loans
  2. Scholarships
  3. Family support – Philosophies surrounding a parent’s financial obligations to their college-bound children sway from “at all costs” to “time to learn self-dependence.” Parents who want to ease the burden from their kids, but cannot pay out of pocket, can apply for Federal PLUS loans. Just remember, PLUS loans taken out by a parent stays in the parent’s name and cannot be transferred to the student.

Okay, so you’ve decided to attend NYU, but your financial aid package wasn’t as sweet as you anticipated – plus, you’re living in the most expensive city in the nation – you need some private lending options to supplement your savings from babysitting and mowing lawns.

Student Choice

StudentChoice.org is a servicing organization that’s used by credit unions like mine to handle things like origination, processing, school-certification, disbursement, and servicing. Rates, approval, and underwriting is provided directly by your credit union, and your loan is issued through a line of credit that can be revisited through your academic career. 

What it means for you is that while the money is coming from your credit union, the customer support and account management is handled through StudentChoice.org. The result is an easy to use interface with clear language around terms and conditions, and for scheduling bill payments.

CU Student Loans

If you don’t currently belong to a credit union, but feel better using one for your student loans, you can consider CU Student Loans. Whereas Student Choice is merely a service used on behalf of your particular credit union, CU Student Loans centralizes the student lending across over 100 credit unions. You can apply without being a member and they’ll find a credit union with whom you can become a member.

There are a couple of things that are neat about CU Student Loans that we liked.

Good credit and academic standings are highly rewarded. 

CU Student Loans uses their own formula for determining rates. For students with a good credit history, you won’t need a cosigner. And if you have a good GPA, you may find you qualify for the lowest rates available through CU Student Loans, who uses their own formula to issue rates as low as 3.47 percent.

Their terms are flexible and rewarding.

Cosigner release is eligible through both services (24 with CU Student Loans, 48 with Student Choice), which means Mom and Dad get off the hook after two to four years of on-time payments.

Like many private lenders, you can get a 0.25 percent rate reduction for direct withdrawals from your account. CU Student Loans will also knock down 1 percent off your rate once you’ve paid 10 percent of your balance.

CU Student Loans can also help you consolidate and refinance existing student loans at a lower rate.