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Borrowers with older federal debt may have rates as high as 8.5%.
While the best rates on consolidation loans are reserved for the most creditworthy borrowers, Citizens has been able to lower its typical customer’s rate by 1.5 percentage points when refinancing private loans, says Brendan Coughlin, the company’s president of auto and education lending.
People with federal student loan debt now have a few options to lower their rates with private consolidation loans, but consumer advocates warn they could be giving up vital protections in doing so.
Royal Bank of Scotland Group Plc’s Citizens Financial Group recently expanded its student loan refinancing program to include federal as well as private student loans.
Yu questions whether the borrowers targeted by these lenders understand how vulnerable they are to financial setbacks such as job losses.
“A lot of people think they’re not ever going to default,” Yu says, “but there are very high delinquency rates on student loans.” Who’s getting loans So far the lenders are wooing the lowest-risk borrowers: graduates with steady jobs, good credit and enough income to pay down their loans.
Those protections include access to federal income-based repayment and forgiveness programs as well as generous forbearance and deferral options.
Common Bond, which has refinanced about 0 million in student loans so far, restricts its prospective clients even further to those with business, law, medical, or engineering degrees, says Chief Executive Officer David Klein.The lenders tout variable rates that start at less than 3%.