Refinancing Student Loans with a Credit Union

By Penny Redlin September 15, 2021

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Can you Refinance a Student Loan at a Credit Union

Yes, you can refinance a student loan at a credit union. However, not all credit unions offer a private student loan refinance loan option , so it’s important to research the credit union beforehand. In general, credit unions are not as large a financial institution as some banks and as such have limited resources with which to fund student loans.

Due to the way credit unions are structured, they use the deposits of their members to fund loans for other members. The availability to process loans is dependent upon the size of the membership of the credit union and the amount of money on deposit at a given credit union. That said, if you find a credit union that does offer refinancing for student loans, and your balance is within the limits available at the credit union, then yes, you can absolutely refinance a student loan at a credit union.

Credit Unions versus Banks for Student Loan Refinance

You might be wondering what is the difference between a bank and credit union? Credit unions differ from banks is that they are owned by the membership they serve. At a bank, anyone can go in and open an account or take out a loan (assuming they are creditworthy) but at a credit union, you must be a member to take advantage of their products and services.

To become a member of a credit union, it’s required that you meet specific criteria. This usually means that you are affiliated in some way with a given employer, group, or union. In some cases, you merely need to live, work, worship or go to school in a given area to qualify for membership. If you find you don’t qualify on your own, but have an immediate family member that would, the family member can join and once they have membership, you may be able to join due to your family ties.

The reasoning for the strict membership criteria is that it’s important for the credit union to establish a community within its member base. This community, with its unique ties to each other, are more likely to work to serve the other members and offer them benefits that might otherwise not be available at a traditional bank.

Why You Should Refinance a Student Loan at a Credit Union

There are many reasons to consider refinancing a student loan. You might be looking to reduce your current interest rate. You might be looking to bundle several loans together into one for more convenient payment management. You might be dissatisfied with your current lender and want to change or at least change the terms of your loan. These are all valid reasons to refinance a student loan, however, why should you refinance your student loan(s) with a credit union.

Credit unions, because they are non-profit, member owned financial institutions, are able to offer lower interest rates to their membership than can be found at some banks. Additionally, credit unions seek to minimize or eliminate (where possible) fees for processing loans. The lower interest rate and the reduction in fees can amount to desirable savings, especially over the length of the loan.

Another perk to borrowing from a credit union, is the excellent customer service provided to its members. If you are looking to refinance and want to ensure you are being well taken care of, a credit union is the right place for you.

Important Considerations when Refinancing Student Loans with a Credit Union

As was mentioned earlier credit unions are different from banks and there are some important considerations that must be addressed before choosing to refinance your student loans at a credit union:

Membership is required

Credit unions require people to join and become members to gain access to their products and services. Membership criteria will vary but usually requires affiliation with a specific group, union, or employer. The employer might be quite large like the armed forces or U.S. government or could be a small local company. If you find that on your own you cannot become a member, it’s possible you have a family member that qualifies; and if they join, you may be able to join as well.

It might be difficult to find a credit union that offers student loan refinance

Not all credit unions offer refinancing for student loans. Take some time and do some research, checking to see if the credit unions where you or a family member may qualify for membership, offer this service. If they do, make sure that the interest rates and fees are desirable to you.

The credit union you choose may have loan limits that exceed your student loan debt

Depending upon the total amount of your student loan debt that you are seeking to refinance, you may or may not be able to borrow the whole amount or bundle all your separate loans together. Credit unions rely on the deposits of their membership to fund loans. Smaller credit unions will have less resources and a limited ability to fund large loans. Check to see what (if any) loan limits a credit union may have to ensure they will be able to fund the full amount you are looking to refinance.