In the perfect world, federal student loans and financial aid would be enough to cover a four-year college education. For countless Americans, that’s simply not the case. With the cost of a college education rising each year, many people need to supplement federal aid with private student loans. While traditional banks were initially shy to lend to college bound students, that fact has changed in recent years, ushering in an era where fintech startups and traditional banks are jockeying for business in the student loan industry.
Citizen’s Bank, a traditional bank, has become a big player in private student loans and private student loan refinancing. The joy of a private bank’s student loan interest rates is that they aren’t etched in stone because they are dependent on market fluctuations. While Federal rates change from year to year, private rates are much more volatile; they can change from month to month. The rates at Citizen’s Bank changed recently; in this case, they have gone up in recent weeks.
For starters, take the variable interest rates the bank charges on student loans for undergraduates. In November, the rate that Citizen’s Bank charged was between 2.53% and 10.28%, but that has since changed and inched higher. As of February 1, the rate jumped to between 2.77% and 10.52%. Fixed rate undergraduate loans stayed the same during that time frame at a low of 5.25% and a high of 11.75%.
The variable rate on graduate loans increased to between 2.77% and 9.77% in February from 2.53% to 9.53% in November. For fixed rate graduate loans, the interest rate actually decreased to between 4.75% and 11.45% from 4.75% to 11.75% in November. Business/law school variable rate loans increased to 2.77% to 9.33% in February from 2.53% to 9.10% in November. The fixed rate business and law school loans stayed the same at between 3.99% and 10.73%. The parents fixed rate loan remained the same at 5.95% to 6.55%.
On the refinancing front at Citizen’s Bank, interest rates also crept up from December 15 to February 1st. Borrowers of undergraduate variable rate loans are going to pay anywhere from 2.38% to 8.17% interest compared to the previous rates of 2.21% to 8.00%. The fixed rate on an undergraduate loan remained the same between 4.74% and 8.24%. As for variable graduate student loans, the rate increased to between 2.38% and 8.17% from 2.21% to 8.00% while fixed rate graduate loans remained steady at 3.74% to 8.24%.
When it comes to variable rate loans, most private lenders rely on LIBOR when setting interest rates. In essence, LIBOR is the rate that a group of international banks charge each other when making big loans. That rate determines what borrowers will pay on all sorts of loans including student debt. According to Bankrate, the three month LIBOR rate stands at 1.03%, which is up from 1.00% last month and 0.62% a year ago. This explains the higher rates on variable student loans at Citizen’s Bank.
Author: Dave Rathmanner
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