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Citizens Bank Student Loan Review: Low Rates but Some Concerns

Citizens Bank offers one of the better in-school student loans, but there are several risks that borrowers should understand before signing up.

Written By: Michael P. Lux, Esq.

Last Updated:

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Editor’s Note: This page contains the review for the in-school student loan from Citizens Bank. The review for the Citizens Bank refinance loan for existing borrowers is a separate article.

Citizens Bank has created an appealing student loan option for many undergraduate borrowers. The interest rates are low and Citizens has a unique program that makes it an excellent option for many borrowers just starting school.

That being said, Citizens Bank Student loans do come with some concerns, and we find the advertising materials to be a bit misleading in a couple places.

Citizens Bank Student Loan Basics

Citizens Student Loans
Loan Types Offered:Fixed and Variable
Best Variable Rate:1.16%
Best Fixed Rate:4.18%
Repayment Length Options:5, 10, and 15 Years
Offers Loans Directly to ParentsYes

As the table above shows, the interest rates with Citizens One start out fairly low. Unfortunately, these low rates are only available to borrowers with excellent credit or a cosigner.

Another major limitation is that the best rates are only available for borrowers who choose the 5-year repayment length and start repayment during school. Opting to begin repayment after graduation or picking a longer repayment length will result in higher interest rates.

Like most private lenders, Citizens places an emphasis on having a cosigner due to the fact that most students have little or no credit history.

Finally, Citizens does not charge a fee for applications or loan origination.

Citizens Bank Advantages

Advertised interest rates with Citizens are among the best in the market. Having the best-advertised rates doesn’t necessarily mean that Citizens will be the lender that actually offers the best rate, but it does mean that Citizens is worthy of borrower consideration.

Citizens Bank also advertises that they are the only lender with a multi-year approval program. The theory behind a multi-year approval is excellent. Borrowers can secure funding not just for the coming school year, but for future school years as well. The idea is to help students avoid the nightmare scenario of being one semester short of graduation and no longer able to secure funding for school. According to Citizens, last year 64% of their borrowers took advantage of the multi-year approval.

Unfortunately, there are some concerns with the multi-year approval.

Disadvantages of the Citizens Bank Student Loan

Locking down funding for future years sounds like an excellent idea, but the fine print with Citizens makes it clear that the future funds are not exactly “locked” down.

For starters, there is still a soft credit pull before each year. Citizens is correct that it is better than a traditional hard credit inquiry for credit scores, but if this was truly a multi-year approval, additional credit checks shouldn’t be required. Citizens makes it clear that the soft credit check is necessary to “verify continued eligibility.” This means that future negative credit reporting could jeopardize the funds that were previously approved.

The fine print on the multi-year approval states that: “After we make the initial loan to you, we may refuse to allow you to take out additional loans under the multi-year approval feature.”

Ultimately, our view of the multi-year approval is that it sounds nice in theory, it might help out some borrowers, but it isn’t the game-changer it first appears to be.

We also don’t like that Citizens suggests that their loans are a better alternative than federal government loans such as a Graduate PLUS loan. The problem with all private loans, including the Citizens One loan, is that these loans lack federal protections such as income-driven repayment plans and student loan forgiveness. Our view on private student loans is that they should supplement federal borrowing… not replace it.

No student is guaranteed to graduate and no student is guaranteed a job at graduation. Because of future income uncertainty, students should seek out federal protections when possible.

Citizens Bank Final Review

The Citizens Bank Student Loan is one of the better private student loan options available. No private lender will be able to compete with the federal government loan terms, but for borrowers who have maxed out their federal loans, Citizens is a solid option.

We applaud Citizens for the innovation of the multi-year approval, but wish borrowers had more assurances regarding future funding availability.

Borrowers looking for a private student would be wise to check their rates with Citizens.

However, checking with one lender is never enough to find the best possible rates. Borrowers may want to consider a tool like Credible, where they can check rates with Citizens at the same time as other larger lenders such as Sallie Mae, College Ave, and Discover.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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