Navy Federal Sails Into Student Lending
The world’s largest credit union could someday become the world’s largest issuer of private student loans, with most if not all of those loans generated and serviced online.
Navy Federal Credit Union, which is headquartered in Vienna, Va. and holds $64 billion in assets, today announced a partnership with New York City-based online lending service platform LendKey to offer private student origination and consolidation loans to the credit union’s 5.5 million members worldwide.
The two organizations have been discussing the partnership for some time, according to LendKey CEO Vince Passione. The online service provider has been quietly staffing up to better manage the anticipated spike in business the partnership will provide.
“This is a very discerning credit union given their client base and who they are,” Passione said. “This doubles the size of the membership base that we can serve.”
LendKey currently serves 305 credit unions and community banks, providing online support for private student loans, many of which are participation loans shared among as many as 10 credit unions. Navy Fed has opted for what Passione called LendKey’s customization program and will not offer participation opportunities, preferring to finance 100% of the private student loans the program generates.
“Navy did a very thorough job in ensuring that the program was consistent with their current underwriting standards,” Passione said. “Our partnership with Navy Federal provides further validation that our 'lending as a service' business model is scalable for even the largest credit union in the country.”
The new program marks Navy Federal’s first foray into the private student loan market, but the credit union still has about $300 million worth of federally-guaranteed student loans on its books, according to Aaron Aggerwal, Navy Federal’s assistant vice president of educational lending (pictured). The private student loans come in response to increasing member requests, he said.
“Our research has shown that members are looking to Navy Federal for these loans,” Aggerwal said. “As many as one million Navy Federal members have student loans of various types. It’s a healthy amount and we feel this is a tremendous opportunity.”
The credit union evaluated a number of providers, but felt that LendKey’s capabilities best aligned with Navy Federal’s approach, Aggerwal said. Private student loans are also a good way to build a financial relationship with young borrowers just starting their careers in hopes of becoming their primary financial institution, he added.
“We’re happy to support members pursuing higher education and are all about putting our members in the best possible position to achieve financial stability and success,” Aggerwal added.
As of February, Navy Federal’s consumer loan portfolio totaled $656 million, according to spokesman Michele Townes. The number does not include mortgage or equity loan products.
In addition to private student loans, LendKey also recently introduced an auto lending program in partnership with TrueCar auto buying service and will re-launch its “green” loan program, currently limited to New Jersey credit unions, as a nationwide home improvement loan program later this year. Thus far, no discussions have ensued with Navy Federal regarding these other programs, Passione said.
“Navy Federal is aware of LendKey’s other programs, but the engagement now is clearly on the education loan side,” Passione added. “We don’t have plans for expansion right now.”