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Updated on Thursday, October 29, 2015
Paying for college is a hefty burden for students right out of high school, so it’s no surprise many parents want to offer a helping hand. The Parent PLUS loan from the U.S. Department of Education is one option parents can rely on to fund an undergraduate degree.
Parent PLUS loans disbursed between July 1, 2015, to July 15, 2016, have a fixed rate of 7.24% for the life of the loan. That interest rate can be a bit steep when compared with refinancing options. Citizens Bank (RI) offers a refinance, which is a solution for those who can qualify for a lower rate once their dependent student graduates.
Basics of the Citizens Bank (RI) Parent PLUS Refinance
Citizens Bank (RI) has loan terms of 5, 10, 15 and 20 years. Fixed interest is available from 2.99% APR . The lowest rates include a 0.50% discount that’s made up of two offers.
First, you get a 0.25% loyalty discount if you have an open Citizens Bank (RI) account when you apply for the refinance. Then, you receive another 0.25% discount if you use autopay from any bank account. Citizens Bank (RI) will refinance up to $90,000 for bachelor’s degrees and below. But, you can’t consolidate loans taken out by parents with the loans taken out by students.
The student must no longer be attending school for a Parent PLUS loan to qualify for refinancing, but a completed degree isn’t required. If the student hasn’t earned a degree, at least 12 full payments on the student loan must be made before it can be refinanced.
Applicants must be U.S. citizens with a Social Security number. U.S. resident aliens have to apply with a co-signer who is either a U.S. citizen or permanent resident.
As far as financial history, Citizens Bank (RI) considers borrowers with strong credit and you must make a minimum annual income of $24,000. Citizens Bank (RI) allows you to add co-signers to get approved or to secure a lower interest rate. Co-signers are eligible for release once 36 on-time payments are made on the loan.
Application and Funding Process
If you’re interested in this refinance, you’ll have to provide the following information:
- Social Security number
- Gross annual income
- Employer information
- Monthly rent or mortgage payment
- Current loan account numbers, balances, monthly payments, due dates, interest rate type and last statement
All of the information you provide is verified once your application is submitted and Citizens Bank (RI) offers you a final decision. If the application is approved, you’ll choose your type of interest rate (fixed or variable) and your loan term length. At closing, you accept the loan terms and give your final sign off. Then, Citizens Bank (RI) pays off the Parent PLUS loan and you start paying your newly refinanced loan.
Fees and Gotchas
The great thing about the loan process with Citizens Bank (RI) is the simplicity and doesn’t cost you anything. There’s no application fees, origination fees or prepayment penalties. Plus, the terms of the agreement are transparent. The one condition you should be mindful of is that you need to have an open Citizens Bank (RI) account before applying to qualify for the 0.25% loyalty discount.
Accounts that qualify for the loyalty discount include checking accounts, savings accounts, money market accounts, certificates of deposit, automobile loans, home equity loans, home equity lines of credit, mortgages, credit card accounts, education refinances and other private student loans from Citizens Bank (RI).
Pros and Cons
The big pro of using Citizens Bank (RI) is the fact that it will refinance Parent PLUS loans. Student loan refinancing is a major market right now, but not all lenders will refinance this type of federal loan. We’ll review a few of your other options in the next section. In addition, the lack of fees overall is a major plus.
The con of refinancing your Parent PLUS student loan is you give up the benefits of having a federal student loan. It’s true, Parent PLUS loans don’t qualify for some of the perks of other federal student loans like most income-driven payment plans (you could be eligible for ICR). But, Parent PLUS loans may be eligible for deferment, forbearance or discharge in certain circumstances like financial hardship or death.
Alternatives to a Citizens Bank (RI) Parent PLUS Refinance
There are two other Parent PLUS refinance options that have even lower interest rates.
Laurel Road Bank(formerly known as DRB)
The refinance at Laurel Road Bank offers variable interest starting at 1.89% APR and fixed interest starting at 2.80% APR. Like Citizens Bank (RI), the lowest rates include a 0.25% discount for making electronic payments. But, to get the discount you must make payments directly from a Laurel Road Bank checking account. Terms are available for 5, 10, 15 and 20 years. Laurel Road Bank doesn’t charge application fees or origination fees. The minimum amount you can refinance is $5,000 and you can refinance up to 100% of the Parent PLUS loan.
SoFi offers variable rates from 2.25% to 5.94% APR. Fixed rates range from 2.99% to 5.94% APR. Both variable and fixed rates include a 0.25% discount for using autopay. There are no application fees, origination fees or prepayment penalties. Loan terms are available for 5, 7, 10 and 15 years. The loan minimum is $$5,000 and the maximum is the amount of your entire loan.
Who Will Benefit Most from a Citizens Bank (RI) Parent PLUS Refinance?
A Parent PLUS refinance is particularly useful for parents who’ve spent a lifetime building excellent credit. Excellent credit will qualify you for a lower interest rate than the Parent PLUS loan provides. This can save you money on interest over time and lower your monthly payment. Head over to the Citizens Bank (RI) savings calculator page to see exactly how much you can save.
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