WASHINGTON — Another player in the student-loan market is now offering borrowers lower interest rates.
Citizens Financial Group announced Tuesday that it’s allowing parent and student federal loan holders to refinance into private loans, the Wall Street Journal reports.
The Providence, Rhode Island-based bank says those borrowers with good credit scores, proven long-term employment and a Citizens checking account would receive the lowest rate. Rates could start as low as 4.74 percent, while variable-rate loans could have rates as low as 2.31 percent.
These offers are substantially lower than rates parents received who signed up for a federal Plus loan. Those fixed interest rates hovered between 6.41 percent and 8.5 percent since the 2006 academic year. Federal loans are usually higher and do not offer borrowers many options for lowering rates. The government allows borrowers to consolidate all loans into one, yet the interest rate is simply a weighted average.
Other banks have already offered something similar in order to attract customers. Discover Financial Services, Social Finance and Commonbond all have opportunities to refinance federal loans.
Citizens says the goal is to attain new clients while earning their trust. The target demographic is young borrowers who hopefully would return in the coming years to finance a mortgage or seek other financial services.
The Wall Street Journal reports that for many families, private loans are much cheaper than federal loans, which is a reversal from even a year ago.
In order to qualify for Citizens’ refinance opportunity, borrowers need at least $10,000 in debt, and they can refinance up to a maximum of $90,000 from undergraduate studies, $130,000 in undergrad or graduate studies and up to $170,000 for dental, medical or law studies. Repayment periods would last 15 to 20 years.
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