Credit unions and community banks have traditionally stood as direct competitors, vying for the attention of similar types of consumers. But in the private student lending market, a fierce face-off between the two is not expected, several experts say.

"As far as competition goes, some existing lenders are scaling back their presence in the market, but new lenders are cropping up all the time," said Greg Jaeger, the private student loan manager for the $4.6 billion, Peoria, Ill.-based Citizens Equity First Credit Union.  "It is hard to say how much competition is coming from community banks. In any case, competition among lenders is good for borrowers."

Citizens Equity began offering private student loans through CU Campus Resources, a wholly owned CUSO of the $1.4 billion UW Credit Union of Madison, Wis., in 2011. Jaeger said in the first year of its private student loan program, Citizens Equity exceeded its goals, grabbed the attention of members and nonmembers and is poised to continue growth. As of Dec. 31, 2011, Citizens Equity held 3,680 nonfederally guaranteed student loans totaling $28.3 million, with an interest rate of 0.08%, according to NCUA Call Report data.