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Credit Unions Fill the Gap in College Funding with Private Student Loans

June 14, 2013
Personal Finance
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The outlook for students trying to fund their higher education has soured in recent years. Tuition has steadily risen, at both public and private schools, to near unaffordable levels for many Americans. Federal funding can help alleviate the financial burden, but oftentimes, students have to take on private loans to meet tuition costs. Making matters worse is the impending change to the Stafford subsidized loan interest rate. The federally funded loan is set to see an interest rate jump from 3.4% to 6.8%, unless Congress acts before July 1. Since these loans are designed for students who demonstrate the most financial need, this would put an added stress on their ability to pay off the loans. With the deadline in sight and disagreements between Democrats and Republicans stalling any progress on competing proposals, it appears likely that the rate will revert to 6.8%. No matter the outcome, students still need help paying for college, and high-value, affordable private loans can provide that help.

(Updated 7/2/13: Stafford subsidized loan rates doubled to 6.8% on Monday, July 1, as Congress recessed for the July 4th holiday. This will cost students an additional $2,600 and makes affordable private loans an even more important resource.)

Private Loan Alternatives at Credit Unions

Federal loans remain the most cost-effective way to help pay for college, as private lenders tend to have higher interest rates. However, once government options, scholarships and grants have been exhausted, students and parents must turn to other sources for funding. Credit unions hope to fill that need with accessible private loans that carry fair interest rates and payment terms. These loans are sourced through companies that partner with schools to ensure students are getting the funding they need, but the credit unions manage the loans themselves. This allows students to take advantage of the personal, member-oriented service credit unions can provide.
Here’s a look at two credit union loan programs that are helping students get the funding they need for their education.

Credit Union Student Choice was founded in 2008 by a group of credit unions seeking to offer school-certified, affordable private loans. Individual credit unions manage the loans and determine interest rates, but Student Choice oversees the processing and servicing of the loan. There are no origination fees or prepayment penalties. CU Student Choice encourages credit unions to lend to students within their community, which helps foster a long-term beneficial financial relationship between student and credit union.

Participating credit unions include:

Landmark Credit Union (New Berlin, WI)

66 Federal Credit Union (Bartlesville, OK)

NASA Federal Credit Union (Upper Marlboro, MD)

Student Loans from NASA Federal Credit Union offer deferred payment while in school, flexible repayment options, no origination fees and competitive interest rates. Speak with a Student Loan Specialist at 1-800-322-8816 to apply by phone, or apply online.
CU Student Loans is a network of more than 160 credit unions managed by a Credit Union Service Organization called Member Student Lending, LLC. Their cuScholar loan has variable interest rates ranging from the 3-month LIBOR + 2.99% – 8.99%, depending on your ACS grade, which takes into account both credit history and academic progress. Undergraduates pay no origination fees, and their interest rate decreases 1% after entering the full repayment period and paying 10% of the principal loan amount. CU Student Loans also offers cuGrad Private Student Loan Consolidation, with variable interest rates ranging from the 3-month LIBOR + 4.25% – 6.75%. There is a 1% upfront fee for the graduate student loan charged at origination.

“The cuScholar program was built upon two fundamental financial literacy concepts: “Know What You Owe” and “Learn By Doing”. A minimum monthly payment reminds the borrower to “Know What You Owe” by monitoring their account, and students experience “Learn By Doing” by setting up a checking account for ACH to begin repayment of debt while they are in school, rather than later. Also, students build a positive credit history before graduation, which will help them become financially independent.”

Ken O’Connor, Director of Student Advocacy at LendKey

Participating credit unions include:

ABCO Federal Credit Union (Rancocas, NJ)

Central Virginia Federal Credit Union (Lynchburg, VA)

“Today college costs have risen tremendously and have become a major concern for our members.  Our goal is to provide a way to make their dream of sending their child to college a reality!  And cuStudent Loans has provided an avenue to finance their higher education.”

-Kim Wilkerson, VP Marketing at Central Virginia Federal Credit Union

AAFES Federal Credit Union (Dallas, TX)