Where is a Private Loan Lender for Financial Aid for College?

While most banks have been eliminating their college student loans, credit unions have been adding them. And many have added scholarship incentives for their customers, as well.

This is because credit unions are full-service financial institutions. They want your business.

They know that the college students they loan money to today, will be back for their other lending, savings and investment needs. Credit unions are moving in to the student loan market to:

• grow their customer base
• build member loyalty
• add long-term additional income
• diversify their assets

College loans for students are also a more secure model for a private loan lender, than car loans or mortgages. Defaulted student loans are fewer and college loans are almost impossible to discharge in bankruptcy.

In some cases, credit unions have partnered with state governments (as in Connecticut and New York) to reduce their risk.

Why Choose a Credit Union for Private Money to Borrow?

• There are no origination fees (although you may have to open an account- minimum is usually $5).
• Credit union interest rates are lower than other private lenders. For instance, rates for Sallie Mae college loans are between 2.87% and 10.48%, but most fall towards the upper level. (That 2.87% is mostly to draw borrowers in; very few actually get that rate.) The average credit union rates are 6.0-6.25%.
• Better benefits are offered. Credit unions are competing for your business- some benefits that are offered are:
  • 1% rate discount after 10% of the loan is paid
  • .25% discount for automatic withdrawal
  • rate discount for higher GPA
  • 30 day no-fee cancellation
  • a single application for a line-of-credit for all your college years
  • lower interest rates for repaying interest while in school or immediate repayment on graduation
• Any educational expense can be covered- such as tuition, room & board, books, computer, and also past due tuition bills.

It is important to note that credit union interest rates are variable- the same as with any other private loan lender (or most of them).

Credit Union Student Loan Repayment Plans

You could:

1. Defer all payments until 6 months after graduation and then make equal payments for 20 or 25 years (depending on the amount you borrow).
2. Make interest-only payments while in school and then have the rest spread out over 20 or 25 years.


3. Start making interest and principal payments while in school.
4. Use their graduated repayment option- For the first two years of repayment, your payments will either reflect just the interest for that period, or else the monthly payments for those two years will be as though the loan was spread out over forty years.

   After the two years, your payments will be higher than the standard repayment.

Most credit unions offer a longer payment term of 20-25 years. A large private loan lender like Wells Fargo student loans, offers a shorter, 15 year term.
The features offered by each private loan lender will vary from credit union to credit union. A public employees credit union may differ from a community credit union.

You will have to join a credit union. Membership is easy to qualify for- there are 70 million people who belong to credit unions and it is estimated that another 50 million could join one if they wanted to. It is likely that you would qualify for more than one.

If you have joined one but no longer meet the requirements, you can still keep your membership. If someone in your family or household was a member, that would probably qualify you also.


Go to these pages for more useful information on other financial aid topics:

Instant bad credit loans

State student loans

Government grants for college