U.S. Bank Student Loans: Why the Program Ended and How It Impacts Borrowers
U.S. Bank ended its student loan program. We'll explain why that happened and what alternatives are available for students.
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In March 2012, U.S. Bank announced that they would stop issuing new student loans. They cited high default rates and increased government oversight as the two main reasons for their decision. At the end of 2011, student loans made up about 2% of U.S. Bank’s total loan business.
Borrowers who still have U.S. Bank student loans can keep them as they are or move them to a new lender by refinancing. We’ll explain where to find help if you have questions or problems with your U.S. Bank student loans.
Even though U.S. Bank no longer offers student loans, borrowers can find many other student loan providers. Keep reading to learn about your funding options and how to choose the best lender.
In this article:
- Why did U.S. Bank stop offering student loans?
- U.S. Bank student loan alternatives
- How to choose the best alternative
- If you hold existing U.S. Bank student loans
Why did U.S. Bank stop offering student loans?
Like many lenders, U.S. Bank found that its student loan department wasn’t as profitable as its other lending products.
“It’s a very small business for the bank, so we made a strategic shift to move our resources elsewhere,” U.S. Bank spokeswoman Nicole Garrison-Sprenger said in a 2012 press release.
Student loans are becoming less of a money-making venture for many banks, so this closure is just one of several.
U.S. Bank student loan alternatives
If you need student loans to pay for school, you should turn to federal student loans first. Federal student loans often have lower interest rates, more loan forgiveness options, and longer forbearance periods than private student loans.
The annual limit for federal student loans ranges from $5,500 to $12,500 for undergraduate students, depending on the type of loan. The annual limit is $20,500 per year for graduate students. Once you’ve reached the annual limit, you can apply for a private student loan to fill the gap.
If you need to take out a private student loan, you can rely on the following alternatives to U.S. Bank:
College Ave
Editorial Selection: Best Overall
- You choose your repayment term
- 95% of undergraduate borrowers are approved for additional loans when applying with a cosigner
- Apply in just 3 minutes
College Ave is a lender that offers private student loans for undergraduate and graduate students. Their marketed interest rates are some of the lowest on the market and don’t charge origination, application, or prepayment fees.
For undergraduate students, fixed interest rates range from 3.24% to 12.99% APR, and variable interest rates range from 0.94% to 11.98% APR.
For graduate students, fixed interest rates range from 3.99% to 11.98% APR, and variable interest rates range from 1.99% to 10.97% APR.
Students can borrow up to 100% of the cost of attendance minus other financial aid. You have to be enrolled at least part-time to be eligible, and you also must be a U.S. citizen or permanent resident. The minimum income is $35,000 a year. Students are allowed to apply with a cosigner.
Here are some other loan details:
- Repayment terms: 5, 8, 10, and 15 years
- In-school repayment options: Full interest and principal payment, interest-only payment, $25 monthly payments, and deferred payment
- Grace period: Six months
- Cosigner release: Available if your income is double the remaining loan amount and if you have had no major negative credit events in the past 24 months. Also, you must have reached the halfway point of the loan term.
- Unique benefits: Quick approval time
Sallie Mae
Editorial Selection: Best for Cosigners
- In-school repayment is rewarded with a lower interest rate
- Cosigner release is available after 12 consecutive, on-time monthly payments
As one of the biggest private student loan companies, Sallie Mae offers undergraduate and graduate student loans, as well as career training loans. Borrowers can take out the annual cost of attendance minus other financial aid.
Sallie Mae offers undergraduate loans with fixed interest rates ranging from 3.75% to 12.85% APR and variable interest rates ranging from 1.87% to 11.97% APR.
Sallie Mae loans have no prepayment penalty or origination fees.
Here are some other loan details:
- Repayment terms: Between five and 20 years
- In-school repayment options: Deferred payment, interest-only payment, or $25 monthly payments
- Grace period: Six months
- Cosigner release: Available after making 12 consecutive on-time payments
- Unique benefits: Quick approval
Earnest
Editorial Selection: Best for No Fees
- No application, origination, prepayment, or late payment fees
- Skip one payment per year, if needed
- Check your rate without impacting your credit
Earnest provides student loans for undergraduate and graduate students and student loan refinancing. Interest rates start at 3.24% for fixed-rate loans and 0.94% for variable-rate loans. It doesn’t charge origination, disbursement, prepayment, or late payment fees.
Unlike other lenders, Earnest requires that borrowers be full-time students to qualify for a loan. Most other lenders only require that students have a part-time schedule to qualify.
Here are some other loan details:
- Soft credit check: Yes
- Repayment terms: Between five and 20 years
- In-school repayment options: Interest-only, principal and interest, deferred repayment, or $25 monthly payments
- Grace period: Nine months after graduation
- Cosigner release: Not available
- Unique benefits: Can skip one payment per year
Ascent
Editorial Selection: Best for Student Support
- Undergraduate students have free access to Ascent’s success coaching program
- 1% cash back reward after graduating
- Check your rates without impacting your credit
Ascent is a student loan provider that offers loans for undergraduate and graduate students. One of the key differences between Ascent and its competitors is that the former offers loans for undergraduate students with and without a cosigner. Almost all private lenders require a cosigner, especially for undergraduates.
Students who don’t have a cosigner will be judged on their credit score and income. If they don’t have a credit history or current source of income, then their GPA and major will be used to determine eligibility.
The maximum annual loan amount is up to 100% of the cost of attendance and up to $200,000 in total. Ascent offers up to 24 months of forbearance, which is longer than most other lenders. If you experience financial hardship, having a long forbearance period can help you get back on your feet.
With Ascent, there are no application or prepayment fees.
Here are some other loan details:
- Soft credit check: Yes
- Repayment terms: 5, 7, 10, 12, and 15 years for most loans
- In-school repayment options: Deferred repayment, $25 monthly payments, or interest-only repayment
- Grace period: Nine months
- Cosigner release: After 12 months of consecutive on-time payments
- Unique benefits: Borrowers can get a 1% cash bonus when they graduate
How to choose the best alternative
When you’re deciding between multiple lenders, compare the interest rates and repayment terms to find the lender with the lowest rates. Look for other features like cosigner release or a long grace period. Research the forbearance period for each lender and consider how much of a buffer you’ll need if you can’t afford to pay your student loans anymore.
Check out our list of student loan companies for other reviews or compare our picks for the best private student loan lenders.
If you hold existing U.S. Bank student loans
If you still have U.S. Bank student loans, they may be serviced by a different company. When student loans are sold to a new servicer, the basic details of the loan, like the interest rate and repayment term, don’t change. The only thing that changes is the company that you make payments to.
You can keep the loans with the existing servicer or refinance them with a different lender. If you refinance, you may be eligible for a lower interest rate which could lead to less in total interest over the life of the loan.
Who manages existing U.S. Bank student loans
If you took out a student loan through U.S. Bank, the loan may be serviced by one of the following companies:
Some of these servicers, like Nelnet or Mohela, service student loans for other issuers. If you have a problem or need to ask a question about your student loans, you should contact the customer service hotline for the servicer you have. You can find this information on your monthly billing statement or your online account.
Can I refinance my U.S. Bank student loans?
If you currently have student loans from U.S. Bank, you can keep them as they are or refinance them with a new lender. Most borrowers refinance student loans to get a lower interest rate, a lower monthly payment, or both.
Refinancing a student loan means moving the loan from the current lender to a new lender. Once the refinance process is finalized, U.S. Bank will no longer be the lender of your loan.
When you refinance, you have to choose what repayment term you want. There is a direct correlation between the length of the repayment term and the interest rate you qualify for. The shorter the term, the lower the interest rate. And the lower the interest rate, the more you’ll save overall.
If you pick a repayment term significantly longer than your current term, you may end up paying more total interest over the life of the loan. Here’s how that might work. Let’s say you owe $40,000 with a 10% interest rate and a 10-year term. If you refinance to a 6% interest rate and a 20-year term, you’ll pay $5,345 more in total interest.
However, your monthly payment will be $242 less each month. Borrowers who opt for a longer repayment term generally do so because they can’t afford their current monthly payment or have elected to prioritize paying off higher-interest debt.
What if I have a federal student loan through U.S. Bank?
U.S. Bank used to issue federal student loans through the Federal Family Education Loan (FFEL) program. This federal loan program was discontinued in 2010, so U.S. Bank has not issued new FFEL loans since then. However, you may still have FFEL loans.
FFEL loans have fewer benefits than newer types of federal loans like Direct Loans. If you have an FFEL loan, you should consider consolidating it into a Direct Consolidation Loan, which may provide more loan forgiveness and repayment options.
You can also choose to refinance FFEL loans into a private student loan if you can receive a lower interest rate. However, doing so will make you ineligible for federal benefits and protections.
