Quite a few lenders and financial institutions offer student loans; not many, however, offer specific help for active duty servicemembers, veterans, and their families. Navy Federal Credit Union, or just Navy Fed, is one of the few who offer products designed with past and present military personnel in mind.
To be eligible for a student loan from Navy Federal you need to already be a member of the credit union. Membership is only offered to active duty or veteran U.S. service members, employees of the Department of Defense, and their families. Loan applicants also need to be current students or graduates of an eligible school, a U.S. citizen or permanent resident, and a legal adult in the state where they reside. If you fit those criteria, read on for some of the available student loan products from Navy Fed.
Keep in mind that not all schools and colleges qualify for Navy Fed loans. The credit union maintains a list of approved schools that you’ll want to check before applying.
Student Loan Products
Even though Navy Fed caters to employees of the federal government, they don’t offer federal student loans. As a credit union, Navy Fed’s products are considered private loans, and as such they have a lot of the same structure as a private loan from a bank or other financial institution.
Navy Fed loans come with zero origination or application fees, and have competitive interest rates – lower than many banks. A variable rate loan currently starts at only 4.00 percent APR, or annual percentage rate. A fixed rate loan is only slightly higher, currently starting at 5.58 percent APR. All rates are dependent on the creditworthiness of the borrower and/or their co-signer.
Student borrowers with nonexistent credit can build their solid credit history and pay less loan costs overall if they apply with a co-signer. Navy Fed recommends that all borrowers bring a co-signer in order to increase their chances of approval. The second party can apply to be released from the loan after 12 consecutive months of on-time principal and interest payments.
Terms can last up to 15 years, and that time period is considered broken up into phases. The first phase is 4.5 years, during which you’re assumed to be in school. During that time, however, your loan isn’t in full deferment. You’ll pay $25 per month or the monthly accrued interest on the loan for the time you’re in school and during the six-month grace period after graduation.
The grace period is followed by a repayment period of ten years. You’ll want to keep those numbers in mind when deciding on how much to borrow. With a fixed term of ten years you could be signing yourself up for some pretty hefty payments if you borrow a large amount.
The loans themselves can be used for far more than just tuition or fees. Proceeds can also be applied to room and board, books, and even computers. The maximum you can borrow is the amount that the school certifies is its “cost of attendance,” a yearly figure that schools release as the total amount it costs an average student to attend that school for a typical academic year.
Interested borrowers can apply for a Navy Fed loan online, and those who set up automatic payments get an additional 0.25 percent interest rate reduction, which can add up to significant savings over time.
On top of Navy Fed’s membership criteria, to qualify for a loan you need either 36 months of established and positive credit history or a co-signer that has that history. You also need at least $15,000 in annual income. If you don’t currently have that much your co-signer will have to be able to prove that income level or greater.
Student Loan Refinancing
If you already have student loans, Navy Fed can also refinance your existing loan balance to get you a lower monthly payment and maybe even a lower interest rate. They are also one of the few lenders who can handle federal consolidation, so if you have both federal and private loans, you can put them together into one payment.
Borrowers should be aware, however, that consolidating means giving up some of the benefits associated with federal loans. Deferment options, public service loan forgiveness programs, income-based repayment, and forgiveness in the case of borrower death are all benefits to federal loans that you lose if you consolidate, so make sure you understand that before applying for a refinance.
The approval criteria for a refinance loan is the same as that for a private student loan; if you cannot make the $15,000 annual income and 36-month credit history requirement you’ll need a co-signer who can. As with the regular loans, the co-signer can apply for release after 12 months of consecutive on-time payments.
Interest rates for refinance are slightly lower than the Navy Fed private student loans, currently starting at only 3.55 percent APR for a variable rate loan and 4.00 percent APR for a fixed rate loan. Since the rates are ultimately determined by the creditworthiness of the student borrower and their co-signer, you may see a higher rate than those published here.
Specific Benefits of Navy Fed Loans
While some student borrowers might not like the idea of having to start repayment immediately while in school, there are a few benefits of Navy Fed that may outweigh that requirement. If you were to lose your job, enroll in another degree program, or experience a financial hardship such as family member deployment, you can apply for forbearance. Forbearance means you can pay a reduced amount or make no payment at all for a certain period of time. Most lenders offer forbearances of up to 12 months – Navy Fed, however, offers up to 24 months. During a forbearance, interest continues to accrue.
Navy Fed also has solid student loan servicing through a subset of LendKey, meaning that the representatives you’ll deal with only handle Navy Fed loans, and will be extremely knowledgeable about the specific products and options available to you.While this credit union has limited membership, and isn’t open to the public, for those who qualify it can be a great option for student loans. You can find out more at the Navy Fed website.