Student loans were once considered a simple loan product for those interested in paying for higher education, but the same cannot be said today. Student loan debt has become an important issue in several ways.
To start, student loan debt is now the second leading form of consumer debt in the United States at $1.52 trillion, lagging behind only mortgages. It is largely viewed as a major economic burden for Americans and highlights caustic issues regarding federal policy, the cost of college, and more.
Since it’s such a hot-button issue, I was glad to get the chance to ask Christine Roberts, Head of Student Lending at Citizens Bank—a key player in the private student loans space—a few questions about student lending, how it got here, and where it’s heading.
In this Q&A:
- Leading the Student Lending Division
- Looking at Federal Student Loans Today
- How Private Lending Fits into the Picture
Leading the Student Lending Division
Q: What was the most challenging aspect of transitioning to your new role of Head of Student Lending back in 2016?
A: There are challenges in starting any new role, but it was rewarding to be able to broaden my responsibilities and become deeply involved in another area of the business. I’m especially proud that I get to work with students and their families to help them find the resources to be as knowledgeable as possible about paying for college. It was particularly surprising to me that there is still so much confusion around what is one of the biggest financial decisions you make in life.
Q: What was the most exciting part about taking on the new role?
A: I have always loved this area because I am passionate about helping others achieve their dream and what we do is way more than just helping someone book a loan. Without question, coming up with a strategy for paying for college can be daunting, but it does not have to be. It’s been really exciting to be able to help students and their parents get the resources necessary to be ready for wherever their life’s journey may lead them.
Looking at Federal Student Loans Today
Q: What is the most striking trend you have observed in student lending over your career?
A: The most shocking thing to me is that people are still very confused and don’t always make the most informed decisions when it comes to paying for college. I always tell students and their parents that the most important thing to do is to make sure you understand all of your options.
First and foremost, parents should have the conversation with their kids as early as possible. No one wants to talk with their children about uncomfortable topics, especially when the child’s future is at hand, but having these conversations early and often can help both you and your child gain a greater understanding.
I would also suggest three important tips: know exactly what your school will cost, pick up as much free money as possible, and determine your best options to fill the gap.
When it comes to filling the gap, look at different lenders and what they could provide. Private loans are a great option because they often provide better rates than the federal government. Keep in mind that, unlike with federal loans, these options don’t offer income-driven repayment plans or loan forgiveness. Private student loans make sense for borrowers with good credit, and most undergraduate loans have a co-signer.
At Citizens Bank we offer a multi-year approval so that you can get approved for what you need all four years. Getting educated about these options can help to ensure you make the right decision for your child and your family.
Q: What do you consider a leading cause for ballooning student debt in the US?
A: One of the major causes is the cost of college tuition. In fact, the cost of tuition has outpaced inflation for decades so that really brings into question whether the path we are on as a country is sustainable.
Over 90% of outstanding student loan debt is held by the federal government, and default rates are much higher than with private loans. Students and families have turned to nearly unlimited federal lending to achieve higher education dreams as costs have escalated far beyond inflation.
We all agree that getting a college degree is still very much a part of the American dream – we need solutions that adequately tackle the challenges of rising tuition and accompanying debt burdens that result in high federal loan default and nonpayment rates.
At Citizens Bank, we support:
- Measures to improve accountability of higher education institutions by evaluating them on the success of their students and risk sharing default with taxpayers.
- Reasonable limits on the Parent PLUS program to help restrain tuition inflation and prevent unnecessary debt burdens.
- End to the Graduate PLUS program that has driven meteoric rises in graduate school costs and instead drive these programs by likelihood of repayment to the private market.
- We support increasing Pell grant amounts and indexing them to inflation to ensure that those in need have access to higher education.
- Improve the disclosures provided to students so they can make informed decisions.
Q: What do you consider a leading cause for the current student default rate?
A: The federal government doesn’t underwrite the loans that they originate so that means that there is no real analysis of a family’s ability to repay these loans after college. With that said, the federal government plays an important role in providing access to loans for those who need it the most. The default rate for private student loans is less than 2%, and they make really good sense for borrowers with good credit.
How Private Lending Fits into the Picture
Q: In your opinion, what advantages and disadvantages do private student loans offer compared to federal loans?
A: Private loans are a great option because they can provide better rates than the federal government depending on your credit profile. Keep in mind that, unlike with federal loans, these options don’t offer income-driven repayment plans or loan forgiveness.
Private student loans make sense for borrowers with good credit, and most undergraduate loans have a co-signer. At Citizens Bank, we offer a multi-year approval so that you can get approved for what you need all four years. Getting educated about these options can help to ensure you make the right decision for your child and your family.
Q: In your opinion, what advantages and disadvantages does private student loan refinancing offer compared to the federal loan consolidation program?
A: Refinancing with private loans can reduce a borrower’s student loan payments significantly.
My top piece of advice for recent college grads is to understand how many loans you have, what the interest rates are, and what the terms & conditions are. On average, college grads come out with 6 loans; but doctors can finish education with up to 20, so that really stresses how important it is to understand what you are facing. Once you understand how many loans you have, then you can plan the best way to tackle repaying them, for example consolidating or refinancing.
Refinancing student loans could make a big difference in your monthly budget. When you refinance multiple student loans, you combine several payments into one and potentially lower your total monthly payment. You can put the extra monthly cash toward your savings or debt reduction goals.
Before refinancing federal student loans, always compare the features and benefits of your existing loans with those of your new loan because when you refinance, you waive any current and future benefits of your federal loans and replace those with the benefits of your new refinance loan. For this reason, it’s important to make sure you’re okay with losing any benefits that are unique to your federal student loans.
Remember that you can choose to refinance your federal and private student loans separately. To keep your federal loan benefits, you may prefer to consolidate your federal student loans through the federal government. Then, you could refinance your private student loans with a different private lender. However, refinancing both loan types together gives you the benefit of a single monthly payment.
About Citizens Bank
Citizens Bank is a subsidiary of Citizens Financial Group, Inc. which is one of the oldest and largest financial institutions in the United States. Citizens offers a wide range of banking products to consumers and businesses.
Check out our full Citizens Bank Student Loans Review for more information about its private student loan and refinancing products.
About Christine Roberts
Christine Roberts is the Head of Student Lending at Citizens Bank, bringing in decades of financial services experience and overseeing the student lending division that helps students pay for college.
Author: Andrew Rombach
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