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Updated on Tuesday, October 16, 2018
Refinancing student loans can help you crush your college debt in many ways, from lowering monthly payments to qualfying for a better interest rate. But before you can enjoy the benefits of refinancing student debt, you’ll first need to find the lender that can offer you your best deal to make it happen.
Maybe you’ve already started checking out student loan refinance providers, but are credit unions on your list? Along with traditional banks and online lenders, many credit unions are offering student loan consolidation and refinancing, sometimes with very competitive terms.
Unlike other banks and lenders, credit unions are structured in a way that can provide unique value to members. So if you want to be sure you’re getting your best deal on refinancing student loans, it’s wise to consider credit unions among the lenders you compare. Here’s what you need to know.
Should you refinance student loans with a credit union?
Credit unions are cooperatives — not-for-profit financial institutions — which means that any money they bring in gets re-invested in order to offer some of the best products and lowest costs to their members.
This is often reflected in their student loan refinance options, which often have low rates and are open to borrowers with a wide range of credit and financial qualifications.
Here’s an overview of some of the pros and cons to choosing a credit union to refinance student loans. All rates and terms quoted below are accurate as of October 9, 2018.
Pros of refinancing with a credit union
Choosing to borrow from a credit union can come with some major upsides. Here are some of the benefits you might come across by including credit unions in your search for a student loan refinancing lender.
Because credit unions aren’t structured like traditional banks, they often have the flexibility to offer financing to a wider range of borrowers. This can be helpful for applicants with less-than-perfect credit, who might be more likely to get approved or be offered a better student loan refinance rate if they apply with a credit union.
Some credit unions also provide unique options on their student loan consolidation products that would be hard to find elsewhere. PenFed Credit Union, for example, allows borrowers to combine their student loans with those of their spouse through its spouse loan refinancing option.
As mentioned, credit unions’ not-for-profit designation means that they’re not as focused on making a profit off of every single product. This allows them to offer student loan refinancing with lower rates and fees.
LendKey, for example, is a network that connects student loan borrowers with credit unions and community banks that offer student loan consolidation. It advertises student loan refinance rates through its network lenders as low as 2.61% APR on variable-rate loans, or 3.19% APR for fixed-rate loans. These community lenders also charge no origination fees to refinance student loans.
Credit unions generally offer a member-centered experience, often going above and beyond to provide you with the help you need when you need it. Some of the most convenient credit unions provide unique features such as 24-hour phone assistance, extended hours in branches, and mobile apps to stay on top of your student loans and other accounts.
Cons of credit union student loan consolidation
Refinancing student loans with a credit union won’t be right for every borrower, however. Here are some potential downsides to watch out for when comparing credit unions to other student lenders.
Credit union products, like student loan refinancing, are typically only extended to credit union members. While some credit unions are open to anyone, each of these financial institutions will have some requirements for who can and can’t join.
You won’t be eligible to join every credit union, so make sure that membership is open to you at whichever credit unions you’re considering as a potential refinancing lender.
While credit unions have competitive student loan consolidation rates, that doesn’t mean they will always beat other lenders.
It’s possible that another student loan lender, maybe a large bank or online financial institution, can beat the credit union’s student loan refinance rate. That makes it all the more important to hunt around and compare refinancing rate quotes so you know how credit unions stack up.
For some borrowers, student loan refinancing won’t make sense no matter who their lender is. Refinancing comes with some drawbacks that every borrower should weigh before moving forward with this step.
Consolidating student loans with a private lender will mean giving up federal student loan benefits, for example. This could include losing access to income-driven repayment plans and federal student loan forgiveness, as well as options like deferment or forbearance that pause payments and can be tough to get from private lenders.
On top of this, many federal student loan rates are already fairly low, so they could be hard for a student loan refinance lender to beat. And since getting a lower interest rate is one of the most common reasons to refinance student loans, you’ll need to do the math before taking this step. You can use our student loan refinance calculator to get a sense of what you might (or might not) save.
Finding a credit union to refinance student loans
If you’re starting your search for the best student loan refinance lender for your needs, you might not know what your options are when it comes to credit unions. After all, you not only have to find credit unions you’re eligible to join, but also to judge whether their products are the best deal for your specific situation.
Here are a few good options to consider as you start your search:
As mentioned above, LendKey isn’t a credit union itself, but rather a network of over 300 credit unions and community banks. It can quickly match you with credit unions willing to refinance your student loans. LendKey does this through its rate quote tool, which uses a soft credit check to get the financial information needed to find you potential lenders — without affecting your credit score.
You will need to complete a brief form providing some general information, including your name and contact information, income, citizenship status, the amount of student loans you wish to refinance, the degree you completed and the college you attended.
Once that’s provided, you can submit the form, and LendKey’s rate tool will automatically match you to credit unions. It will often bring up several student loan refinance offers at once, allowing you to compare multiple options at once.
Credit Union Student Choice Refinancing
Another tool for quickly connecting with credit union student loan refinancing is Credit Union Student Choice. Founded by several credit unions as a solution for student loan borrowers, Student Choice works with credit unions throughout the U.S. to provide the Student Choice Refinance Loan.
The Student Choice credit union locator tool uses your zip code, the college you attended, or your state of residence to return credit unions that match your criteria. From there, you can view the specific student loan refinance rates and terms available.
Once you’ve selected a credit union you’re interested in, you can apply right on the site through Student Choice. You don’t always need to be a member of the credit union just to apply, but it can make the process a little easier, and you’ll typically need to join the credit union before signing the final loan agreement and getting your refinanced student loan disbursed.
Alliant Credit Union
Alliant Credit Union is no longer accepting applications for Student Loans. See alliantcreditunion.org for more information.
The first two options power student loan refinance offerings at hundreds of credit unions. But they aren’t your only option.
Alliant Credit Union, for example, has a flexible membership eligibility policy, which includes one option almost anyone can satisfy: supporting its partner charity, Foster Care to Success. With a $5 donation to this organization, you can become eligible to join Alliant Credit Union.
PenFed Credit Union
As mentioned, PenFed Credit Union offers some unique student loan refinancing options in partnership with lender Purefy. It offers student loan refinancing with variable rates starting at 2.18% APR, or fixed rates as low as 3.23% APR.
PenFed Credit Union’s student loan refinancing is most notable for its flexibility, including such options as refinancing parent student loans or, as mentioned, consolidating student debt with a spouse.
As with other credit unions, you’ll need to join PenFed in order to refinance your student loans there. U.S. federal employees, military members, and their family are all eligible to join PenFed Credit Union. Beyond that, nearly anyone can join the National Military Family Association or Voices for America’s Troops to become eligible for PenFed Credit Union Membership.
Find your own credit union
The credit unions and networks we highlighted here are a great place to start your search for a student loan refinance lender. But you can also search on your own for a credit union to refinance student loans.
You might already be a member of a credit union — if so, check to see if it offers refinancing. You can also search in your community, or use this credit union locator tool from DepositAccounts, another LendingTree-owned company, to find other institutions that you are eligible to join.
Including credit unions among the lenders you consider for student loan refinancing is a smart move. Even so, you should be critical and choosy when evaluating student loan refinance offers, including those from credit unions. With some investigating, you can find enough options to be sure that the final student loan refinancing offer you select will be your best.