USAA Student Loan Alternatives

The United Services Automobile Association, or USAA, is a Texas-based financial institution. It offers a wide range of financial products to members (which include former and active-duty military service members and their families).

Until December 2016, USAA issued private student loans to eligible members in a partnership with Wells Fargo. USAA members received a 0.25% interest rate discount on all Wells Fargo student loans through the program. However, the partnership was discontinued in 2017, leaving many members looking for alternatives for educational funding.

If you’re a USAA member who took out a student loan through USAA in the past, we’ll explain what this change means for your student loans. If you’re looking for a new student loan, we’ll review other popular options below.

In this guide:

• USAA student loan alternatives for military members
• Managing existing USAA student loans

USAA student loan alternatives for military members

Military members—as well as their spouses and dependents—who are looking for a student loan have multiple options available to them. The two most popular options include federal and private student loans.

Federal student loans

Federal student loans are made available through the U.S. Department of Education and are available to all students as part of a financial aid package. Depending on the loan type, these loans are offered either to parents or the student directly.

There are many benefits to federal student loans compared to other education financing options. For starters, the interest rate on a federal loan is fixed and can often be lower than the rates offered by private lenders. There is no credit check required for most federal loans, and in many cases, the student won’t need a cosigner to qualify.

For need-based students, subsidized loans are available. Subsidized means that the government will pay any accrued interest on the loan while you’re in school, during the grace period, and during deferment. Once you begin repaying your federal student loans, you’ll find that income-driven repayment, loan deferment, and federal loan forgiveness can make the process easier and more affordable.

Additionally, military members receive unique benefits during repayment. These benefits include:

• Up to 60 months of interest-free repayment on Direct Loans (disbursed after 2008) while serving on active duty military orders or deployed.
• Loan deferment is offered on all federal loans while performing active duty service or deployed.
• If the loans were taken out prior to joining the military or being called to active duty service, the Servicemembers Civil Relief Act (SCRA) limits your interest rate on those loans to 6% during your time of service.

Private student loans

Private student loans are offered directly by financial institutions, such as banks, credit unions, and online lenders. They are available to parents and students who qualify, and can offer flexible funding for any educational expenses you may incur.

There are many different student loan companies to choose from when shopping around for a private loan. Here’s a look at five major lenders that serve as alternatives to USAA and what kind of private student loans they offer.

Navy Federal Credit Union

For military members, a student loan from Navy Federal Credit Union is probably the option most similar to a USAA loan. Like USAA, Navy Federal is a members-only credit union that caters to the military community in all 50 states. They offer a simple online application process and a quick preapproval process.

To take out a student loan from Navy Federal, you’ll need to be a current member or become one during the loan application process. To be eligible for membership, you must be an active, retired, or veteran service member or the family member of one; Department of Defense (DoD) civilians can also become members.

Student loans are available to full-time students at many colleges and universities, but not certificate programs or trade schools. Cosigners aren’t required, but many student borrowers will need (or want) to add one to qualify for better loan terms. In fact, Navy Federal says that nine out of 10 student loan customers have a cosigner.

Benefits for service members

While our team expected to find unique benefits offered by Navy Federal for military members, we could not find any that stood out from other private lenders. Borrowers are also not offered the option of deferring payments until after school. At a minimum, Navy Federal requires borrowers to make interest-only or $25 payments per month while in school.

Here are some other details about Navy Federal student loans:

• Loan types: Undergraduate & graduate
• Repayment term: 10 years
• Fixed APR: Starting at 4.99% APR with autopay discount
• Variable APR: Starting at 3.16% APR with autopay discount
• Fees: No application or origination fees
• Prepayment penalty: None
• Cosigner release: After 24 months of consecutive, on-time payments

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Note: The remaining private lenders are available to military members and non-military members.

College Ave

College Ave offers student loans to undergraduates, graduates, and parents. The lender also offers a loan for career training programs. These loans can cover up to 100% of your educational expenses (tuition, books, room and board, etc.) with four different repayment term options. Borrowers can choose to defer payments until after school or select one of three in-school repayment plans.

Most borrowers require a cosigner to be eligible. There are no application, origination, or prepayment penalties, and borrowers can get a 0.25% APR discount for setting up automatic payments.

Benefits for service members

College Ave doesn’t offer any specific benefits to service members that differ from what’s available to other borrowers.

Here are some details about College Ave’s undergraduate student loan:

• Loan types: Undergraduate, graduate, parent, and career training
• Terms: 5, 8, 10, or 15 years
• Fixed APR: 3.49% to 12.99% APR with autopay discount
• Variable APR: 1.19% to 11.98% APR with autopay discount
• Fees: Late payment fee
• Prepayment penalty: None
• Cosigner release: After more than half of the scheduled repayment period has elapsed

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Sallie Mae

Perhaps one of the best-known names in educational financing, Sallie Mae offers private student loans with a range of features and benefits. While the company used to also service federal student loans, that division has since split off and is now called Navient.

Currently, Sallie Mae offers undergraduate and graduate loans to students, as well as professional loans and even study loans.

Cosigners are not required but will often be necessary for students with a limited credit history or income, though these cosigners can be released after just 12 months of consecutive, on-time payments. There are no origination or prepayment penalties, and borrowers can enjoy a 0.25% APR discount for enrolling in automatic payments.

Benefits for service members

Sallie Mae does recognize the Servicemembers Civil Relief Act (SCRA) for active-duty military members in repayment. In addition to these benefits, which include deferment and forbearance, Sallie Mae also extends the SCRA interest rate for an additional year after the military service ends.

Here are some other details about Sallie Mae’s undergraduate student loan:

• Loan types: Undergraduate, graduate, professional
• Terms: 5 to 15 years
• Fixed APR: 3.75% to 12.85% APR with autopay discount
• Variable APR: 1.62% to 11.73% APR with autopay discount
• Fees: None
• Prepayment penalty: None
• Cosigner release: After 12 months of consecutive, on-time payments

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Ascent

Ascent offers educational funding to undergraduate and graduate students, for up to $200,000. They have both cosigned and non-cosigned loan products, as well as an outcomes-based loan for college juniors and seniors. They have a simple, four-step application process that allows borrowers to get prequalified without affecting their credit.

There are many different terms and flexible repayment options to choose from with an Ascent loan, including progressive repayment schedules.

Borrowers who graduate can receive a 1% cash back reward.

Benefits for service members

For active duty service member borrowers, Ascent offers SCRA benefits. These benefits allow for fixed interest rates as well as deferment and forbearance periods as needed.

Here are some other details about Ascent’s undergraduate cosigned student loan:

• Loan types: Undergraduate, graduate, outcomes-based qualification
• Terms: 5, 7 10, 12, or 15 years
• Fixed APR: 4.78% to 14.52% APR with autopay discount
• Variable APR: 1.64% to 11.45% APR with autopay discount
• Fees: Late payment fee
• Prepayment penalty: None
• Cosigner release: After 12 months of consecutive, on-time payments

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Discover

Discover is a large, national bank, offering student loans to students and parents. Borrowers can take out a loan for up to 100% of their undergraduate, graduate, and even post-graduate educational needs. There are no application, origination, or early repayment fees, and the repayment term is 15 years.

Interest rates are competitive and come with a 0.25% discount if you enroll in automatic payments. Students who maintain a 3.0 GPA or higher can qualify for a 1% cash back reward on each Discover student loan they borrow. Freshmen may also qualify for an additional 1% reward on their first Discover loan.

Benefits for service members

In addition to SCRA benefits, Discover also allows borrowers to defer their loan payments during a period of active duty military service. This Active Duty Military Deferment program can last up to 36 months.

Here are some other details about Discover’s undergraduate student loan:

• Loan types: Undergraduate, graduate, and parents
• Term: 15 years
• Fixed APR: 4.49% to 13.34% APR with autopay discount
• Variable APR: 1.79% to 11.74% APR with autopay discount
• Fees: None
• Prepayment penalty: None
• Cosigner release: Not available

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Managing existing USAA student loans

If you’re currently repaying existing USAA student loans, we’ll review what the discontinuation of the USAA student loan program means for those loans.

Repaying USAA student loans

While new USAA student loans are not being issued, that doesn’t impact the repayment responsibilities of borrowers who currently hold USAA student loans. This is mainly because USAA simply acted as a third party for its members to connect them with Wells Fargo for their financing needs.

Therefore, repayment of these previously-disbursed loans will continue through Wells Fargo. The repayment schedule, interest rate, and other terms will remain the same, including the unique USAA rate discount members received.

If you’re an existing borrower, you should contact Wells Fargo Education Financial Services with any questions or concerns you may have about your loans. Wells Fargo can help: 

• Make changes to an established repayment plan
• Walk you through your options if you have trouble making payments
• Offer information about cosigner release requests

Wells Fargo can be reached directly at 800-658-3567.

Repayment options for military members

As an active duty member of the military, there are many different student loan repayment options and programs available for both your federal and private loan balances. Here are a few to consider.

Servicemembers Civil Relief Act (SCRA)

The first is the Servicemembers Civil Relief Act, or SCRA, which we mentioned above. SCRA offers an interest rate cap of 6% APR on various interest-bearing accounts, such as student loans and even credit cards when the borrower or cosigner is called into active duty service. To qualify for SCRA interest rate relief, the federal and/or private loan(s) in question must have been obtained prior to beginning your active duty military service.

Higher Education Relief Opportunities for Students (HEROES)

There is also the HEROES Act, or Higher Education Relief Opportunities for Students. This act gives the Department of Education the ability to waive or change certain requirements of your federal student loans while you are serving on active duty status or even suffering certain economic hardships. For instance, the HEROES Act can waive your annual income update for an IDR (income-driven repayment) plan or extend your federal loan status.

Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program is also available to military members. This allows the employees of eligible government or non-profit organizations to get their remaining federal student loan balances forgiven after making 120 qualifying payments. To see if your loans are eligible, visit the PSLF website.

Other programs

Other military student loan repayment benefits include:

• The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity
• Limited PSLF Waiver Opportunity
• Department of Defense (DOD) Student Loan Repayment Program
• Total and Permanent Disability (TPD) discharge

Refinancing USAA student loans 

Since USAA student loans are considered private student loans, they can be refinanced with a new lender to lower your interest rate or change your repayment plan. However, doing so will likely remove the USAA rate discount you received. So, before refinancing, make sure your new rate is lower than the one you have with that discount applied.

Reasons why you would consider refinancing private student loans:

• To lower your interest rate and save on interest charges
• To extend your repayment term to lower your monthly payment (note: this may increase the total cost of your loan)
• To simplify your repayment by combining multiple loans into one
• To release a cosigner from the loan
• To add a cosigner to get better loan terms

When you refinance student loans, you pay off your existing loans with the new funds and end up with one, single new private student loan.

Most lenders don’t charge any fees to refinance, so you won’t have to factor in any application or origination fees. If a lender does, that could be a red flag. None of the companies we picked as the best for student loan refinancing charge these fees.