cuStudent Loan Full Review:
In theory, finding the best student loan consolidation is easy. Google a couple companies, find interest rate quotes, pick the lowest number, fill out the application online, and you are done. Unfortunately, the reality is far more complicated. You need to consider co-signer policies, credit score requirements, customer service, and the fine print.
One company attempting to change the game is CU Student Loans. Their sales pitch essentially boils down to, “We have the big bank benefits, but we will treat you better.” For the most part, they accomplish this goal.
CU Student Loans is not a single company, but rather a collection of not-for-profit credit unions from across the country. Their approach is to work together so that they can compete with the major lenders and offer the lowest rates.
The lowest interest rate that CU Student Loans currently offers is 2.76% at a variable rate. The highest interest rate offered is 7.76%. They also require a yearly income in excess of $24,000. Only private loans can be consolidated through the credit unions.
There is no origination fees with CU Student Loans, and co-signers can be released after 12 months.
As far as ease of getting these loans, the debt-to-income ratio is around the industry standard, but the credit score requirement seems to be a slightly more forgiving than others.
The repayment term on this particular loan is 15 years. There is no penalty for paying off your loan early, and borrowers can also have up to four years of interest only payments.
In order to apply, applicants fill out a 5 minute application. If approved for a loan, applicants are expected to join the local credit union that will be providing the loan. According to a CU Student Loans representative, an initial deposit, typically about $5 is required to establish this relationship.
The big advantage of these loans seems to be that you get the credit union member treatment rather than the typical bank customer treatment. The idea behind a credit union is that it operates as a not-for-profit entity and the “profits” are distributed among the members, instead of being paid to investors and shareholders.
From a purely financial standpoint, the lack of origination fees is a huge advantage. Many lenders will add a small percentage “origination fee” to each loan. While an origination fee does not necessarily mean it is a terrible loan, it is extra cost that has to be factored into the expense of the loan. Think of it as additional interest that must be paid or the cost of the transaction. By not having an origination fees, CU student loans makes it easy to compare the value of a consolidated loans against the current loans that the borrower already has.
Along the same lines as the no origination fee policy is the no prepayment penalty policy. For people who plan on working hard to quickly pay off their loans, these two terms are ideal. No extra money has to be paid at the beginning of the loan or at the end.
Another advantage is the co-signer release program. If you have done any research into loan consolidation, you know that having a creditworthy co-signer is a huge asset. However, nobody wants to be a co-signer, as it is a huge financial commitment. If a borrower proves to be creditworthy and makes 12 on time payments, the co-signer can be released from the loan. This one year release program is definitely one of the shortest on the market.
The one major disadvantage here is that because CU Student Loans is relatively new to the scene, they are not yet offering a huge variety of repayment options. Specifically, the maximum repayment term is only 15 years. If you have a large amount of debt, that can be a pretty ambitious repayment plan. While it would be nice to be debt free in such a short period of time, borrowers must seriously consider whether or not such an approach is feasible. The other limitation is that only variable-rate plans are available. In the event of an economic recovery, the interest rates could go up.
This loan seems ideal for 3 groups of people:
- People who want their co-signer released as early as possible
- People who plan to aggressively pay off their debt
- People who don’t want to deal with the big banks and major lenders
For people who realistically will be paying off their private loans for the next 25 years, other loans may be a better alternative.
One note on CU Student Loans is that they are undergoing a name change. In the future they will be part of LendKey. For now, you apply for a CU Student Loan through LendKey.
Click Here to do the math on CU Student Loans to calculate your possible savings.