Are Federal student loans not enough to cover your education? Then you’re probably looking at taking out private student loans to bridge the gap. Your goal should be to get as close to Federal rates as possible to make your loans more affordable. Let’s see how the private student loan from Citizens Bank compares.
Details of Citizens Bank’s Private Student Loan
You can borrow a minimum of $1,000 and a maximum of $170,000 depending on the level of education you’re attaining:
- Undergraduates are allowed to borrow up to $120,000 of federal and private student loan debt combined, or $90,000 just from Citizens Bank.
- Graduates can borrow a limit of $150,000 of federal and private student loan debt combined, or $110,000 exclusively from Citizens Bank.
- Business and Law graduates can borrow a maximum of $225,000 of federal and private student loan debt combined, or $180,000 only from Citizens Bank.
- Medical and Dental graduates can borrow a maximum of $180,000 or $350,000 depending on degree of federal and private student loan debt combined, or $180,000 straight from Citizens Bank.
Borrowers can choose a 5, 10, or 15 year term to repay their loans, and they can do so on three different types of repayment plans:
- Immediate Repayment: Repayment begins as soon as the loans are disbursed, meaning borrowers are required to make payments while attending school. This option will likely save you the most money in the long run, but might be unrealistic if you don’t plan on working during the semester.
- Interest Only Repayment: Similar to immediate repayment, borrowers are responsible for making payments while in school, but only have to pay enough to cover the interest on the loan. This will likely give you a slightly lower payment and will still save you money on interest. According to Citizens Bank, the average monthly payment is between $53.08 and $91.30, depending on your interest rate.
- Deferred Repayment: This is essentially the same repayment plan federal loan borrowers are on. You’re not required to make payments while in school, and are entitled to a grace period after you graduate.
APRs vary depending on what level of education you’re obtaining and whether you choose a variable rate or a fixed rate. There are four different types of loans: undergraduate, graduate, business and law and medical and dental loans.
Variable APRs are lower than fixed APRs, but they give you less stability as your interest rate can increase at any time (it’s limited to once per month, in this case). Additionally, immediate and interest only repayment plans will give you a lower interest rate than deferred repayment – sometimes 0.50% less. Lastly, choosing a shorter repayment period is going to give you a lower rate as well.
Be aware that if you opt into automatic payments, you’ll receive a 0.25% interest rate discount. If, at the time of applying, you also have an existing account with Citizens Bank, you’ll be eligible for another 0.25% interest rate discount.
A payment example looks like this: if you borrow $10,000 as an undergraduate student and choose to repay the loan in 10 years under an interest only repayment plan, depending on your APR (example APR: 6.25%-10.75%), your monthly payment will be $112.26 to $136.29. The total amount you’d pay is $15,972.44 to $20,657.77. Contrast that with the deferred repayment plan, in which you’d pay a total of $18,085.08 to $23,900.11.
Lastly, earlier in 2015, Citizens Bank introduced its “Multi Year Borrowing Option” specifically for student loans. If you qualify (you must meet certain credit standards), you won’t have to fully re-apply for funds each year. Instead, you’ll lock in the term you’re approved for the first time around, and you can request that the amount you need be sent to the school you’re attending. It’s a much more streamlined process.
How Does the Citizens Bank Private Student Loan Compare to Federal Student Loans?
While the private student loan from Citizens Bank offers a lot of options, you should exhaust your Federal options first. Make sure you fill out the FAFSA and take advantage of the aid you’re offered, as Federal student loans come with repayment assistance options that private loans don’t. They typically have lower interest rates, too.
If you’ve already done that and still need extra financing to cover the cost of tuition or books, then Citizens Bank could be a good option to go with. For the 2015-2016 academic year, the Direct Subsidized and Unsubsidized Loans have a fixed interest rate of 4.29%.
That’s lower than the starting point of 6.39% for Citizens Bank fixed-rate student loans and depending on your credit (or your co-signers credit), you may not qualify for an interest rate that low. Direct Loans also have an origination fee of 1.068% for the same academic year, whereas the private student loan from Citizens Bank doesn’t have an origination fee.
Direct Loans for graduate students have a fixed interest rate of 5.84%, and in most cases, Citizens Bank has that beat. Direct PLUS Loans have a fixed interest rate of 6.84%, again making the loans from Citizens Bank more attractive.
Overall, Citizens Bank isn’t the worst choice you could go with, especially if you’re eligible for the 0.50% interest rate reduction, or you’re a graduate student. Keep in mind that variable rates can be volatile; they’re not locked in like fixed rates are. While the lower rate may be tempting, consider that having fluctuating student loan payments might make budgeting harder down the road.
To be eligible to apply for a private student loan with Citizens bank, you must meet the following requirements:
- Be a U.S. citizen or permanent resident
- OR be an international student with a U.S. citizen or permanent resident that can co-sign your loan
- Must be enrolled at least half-time at an eligible institution and working toward obtaining a degree
- Be age of majority in your state (otherwise you’re required to have a co-signer)
- Have a “reasonably strong credit history” (it’s recommended that younger borrowers apply with a co-signer)
Application Process and Documents Needed
You can easily apply online within minutes. All you need is:
- Your personal information
- A recent pay stub for proof of income
- Your employer’s information
- The name of the school you’re attending
- The total amount of financial aid you’ve already received
- The amount of funds you’re requesting
- Personal references
If you’re applying with a co-signer, you’ll need to provide their name and email address so they can fill out the application as well. If you apply by yourself and you’re denied, Citizens Bank allows you to add on a co-signer and it will reevaluate your application with your co-signers information taken into account.
The first step of the application is selecting the school you want to attend, so you’ll know right away if your school is an eligible institution.
The second step of the application is accepting the general terms of the loan. Citizens Bank actually gives you access to the loan agreement, so you can review the fine print yourself if you wish.
From then on, you fill out your personal information. Citizens Bank will conduct a hard pull of your credit during the application process. If you’re approved and choose to move forward with the loan, you choose the loan option you like best, upload any documents that are requested, sign your loan electronically, and Citizens Bank will send the payment directly to your school.
The Fine Print
There are no application fees, origination or disbursement fees, and no prepayment penalty associated with this loan. However, a late fee will be assessed if 15 days pass without a payment. The late fee is 5% of the outstanding balance. Additionally, if there’s a returned payment, you’ll be charged $15.
Citizens Bank will give borrowers with an existing Citizens Bank account a 0.25% interest rate discount. In case you were thinking of opening one before applying, know that its checking and savings accounts are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. However, if you have another loan under Citizens Bank, that counts toward your eligibility.
Co-signer release is allowed after making 36 consecutive payments of principal and interest (so interest only payments don’t apply). Additionally, if you applied for forbearance or deferment, your payment period will reset, so you’ll need to make another 36 consecutive payments to qualify. If you’re denied a release, you’ll have to wait another year from your application date to apply.
Repayment Assistance Options
Citizens Bank doesn’t make a direct reference to repayment assistance, but deferment and forbearance are mentioned in the fine print, so it might be offered on a case-by-case basis. This is something you should inquire about as you want to make sure you have options in case your loans become too big of a burden.
Pros and Cons of Citizens Bank Private Loan
Pro: Flexible repayment terms. You can choose a 5, 10, or 15 year term, and choose whether to make immediate payments, interest only payments, or to defer payments.
Pro: Citizens Bank is the first to come out with a “Multi Year loan” product. If you can qualify, it would be nice to lock your terms in for all years of your college education.
Pro: There are no fees associated with the loan, save for late payment and returned payment fees, which is standard.
Pro: APRs, especially for graduate and medical loans, are quite low when compared to the federal options borrowers have.
Con: Repayment assistance options aren’t emphasized, and this may be a concern for some borrowers worried about their ability to repay their loans.
Con: Citizens Bank places a lot of importance on credit score and history, which many younger borrowers lack. Co-signers are almost a necessity.
Private Student Loan Alternatives
Not eligible for a private student loan with Citizens Bank? There are a few other worthy alternatives:
SunTrust Custom Choice Loan Fixed APRs are slightly lower than what Citizens Bank offers, though the variable APRs are higher. SunTrust also has repayment terms of 5 and 10 years – you have to borrow over $5,000 for the 15 year term. As a bonus, SunTrust offers borrowers a 2% principal balance reduction if they graduate with a Bachelor’s degree or higher.
LendKey: This isn’t a lender; it’s a platform that aggregates private student loans offered by community banks and credit unions. As a result, it offers a variety of loans from lenders that typically have lower interest rates than big banks. You only need to enter your information once, and all the loans you’re eligible for will pop up.
It always pays to shop around, and you should. Credit bureaus will count all inquiries made within a 30-day window as one inquiry, so your credit won’t be harmed as much as you might think. Take advantage of this and see which lender can offer you the best rates. Your future self will thank you for it when you’re paying back your loans.