The world's largest credit union could someday become theworld's largest issuer of private student loans, with most if notall 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 partnershipwith New York City-based online lending service platform LendKey tooffer private student origination and consolidation loans to thecredit union's 5.5 million members worldwide.

The two organizations have been discussing the partnership forsome time, according to LendKey CEO Vince Passione. The online service provider hasbeen quietly staffing up to better manage the anticipated spike inbusiness the partnership will provide.

“This is a very discerning credit union given their client baseand who they are,” Passione said. “This doubles the size of themembership 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 loansshared among as many as 10 credit unions. Navy Fed has opted forwhat Passione called LendKey's customization program and will notoffer participation opportunities, preferring to finance 100% ofthe private student loans the program generates.

“Navy did a very thorough job in ensuring that the program wasconsistent with their current underwriting standards,” Passionesaid. “Our partnership with Navy Federal provides furthervalidation that our 'lending as a service' business model isscalable for even the largest credit union in the country.”

The new program marks Navy Federal's first foray into theprivate student loan market, but the credit union still has about$300 million worth of federally-guaranteed student loans on its books, according toAaron Aggerwal, Navy Federal's assistant vice president ofeducational lending (pictured). The private student loans come inresponse to increasing member requests, he said.

“Our research has shown that members are looking to Navy Federalfor these loans,” Aggerwal said. “As many as one million NavyFederal members have student loans of various types. It's a healthyamount and we feel this is a tremendous opportunity.”

The credit union evaluated a number of providers, but felt thatLendKey's capabilities best aligned with Navy Federal's approach,Aggerwal said. Private student loans are also a good way to build afinancial relationship with young borrowers just starting theircareers in hopes of becoming their primary financial institution,he added.

“We're happy to support members pursuing higher education andare all about putting our members in the best possible position toachieve financial stability and success,” Aggerwal added.

As of February, Navy Federal's consumer loan portfolio totaled$656 million, according to spokesman Michele Townes. The numberdoes not include mortgage or equity loan products.

In addition to private student loans, LendKey also recentlyintroduced an auto lending program in partnership with TrueCar autobuying service and will re-launch its “green” loan program,currently limited to New Jersey credit unions, as a nationwide homeimprovement loan program later this year. Thus far, no discussionshave ensued with Navy Federal regarding these other programs,Passione said.

“Navy Federal is aware of LendKey's other programs, but theengagement now is clearly on the education loan side,” Passioneadded. “We don't have plans for expansion right now.”