Students Can Make an Educated Decision by Refinancing Loans Before Rate Hike

Brendan Coughlin, president of consumer lending at Citizens Bank, says that 55% of families have not done their financial homework before sending their children to college.
By Gregg Greenberg ,

With a rising rate environment approaching, anybody holding a student loan should consider refinancing, said Brendan Coughlin, president of consumer lending at Citizens Bank (CFG) - Get Report .

"Students should act now to try to lock in low interest rates because with a 15- or 20-year loan, you are going to be dealing with this loan for the rest of your life," said Coughlin.

Coughlin said the price of college continues to rise much faster than the rate of inflation although the costs of other things like housing and technology have dropped. He said 55% of families do not do any financial homework before sending their child to college. As a result, they are not aware that the return on investment might not be favorable at the school they ultimately select.

"Students should figure out what major they want and understand the commensurate income they are going to make coming out of school before making those big-ticket decisions," said Coughlin. "Otherwise they will wake up four years later with a lot of debt and buyer's remorse."

He said the personal situation of the borrower changes once they leave college and begin to establish credit. Coughlin said Citizens introduced the Education Refinance Loan to enable borrowers to refinance their debt.  Since launching, Citizens said it has refinanced over $1 billion and helped borrowers save an average of $135 per month and lower their average annual percentage rate by 1.5%.

Coughlin said it also offers the Citizens Bank Student Loan for parents as an alternative to the William D. Ford Direct PLUS loan program by providing no origination fees which can save borrowers an average of $627 every year simply by avoiding the Federal Direct PLUS loan's annual origination fee.

"There are a lot of ways to save money if you want to help your child finance his or her education," said Coughlin. "The Federal programs come with over a 4% fee that you have to pay just to get a 7.5% interest rate. There are better options."

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