Loans may be one of the least desirable forms of student debt, but the most cost-effective place to get them may be your local credit union.In response to consumer demand, credit unions are starting to jump at the opportunity to offer student loans and, compared to similar products from bigger banks, they're usually a better deal with more favorable terms.
Why credit unions? Many private lenders are leaving the industry because they're now being denied access to much-needed credit. However, credit unions are member-owned and non-profit institutions and don't have a history of sketchy financial practices.
Member interest has fueled credit unions to offer private loans, and some are involved in the federal loan program. Many credit unions have better rates than private lenders because they're working with states and groups to make the loans available.
At this time, 80 credit unions are participating in Credit Union Student Choice offering undergraduate student loans. In order to apply, the borrow must belong to a credit union. The average variable loan rate was 5.8 percent.
It's still in the borrower's best interest to exhaust government loans before turning to credit unions. Mark Kantrowitz, publisher of FinAid says, "Unlike federal Stafford or PLUS Loans, private loans almost always offer variable rates–and those rates can change dramatically over the term that could last a decade or even longer. "
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