The student loan refinance marketplace has changed considerably over the last decade.
Student loans were traditionally handled by the big banks and lenders like Sallie Mae. A few startups recognized an opportunity in the market. They would target low-risk borrowers (those with high incomes relative to their debt and good credit scores) and offer interest rates significantly lower than the big banks.
This approach has proven to be very lucrative to these companies. SoFi, one of the startups, is now the leading student loan refinancing company. Meanwhile, Sallie Mae left the business entirely, as did most of the other big banks. Citizens Bank is now the largest bank still in the student loan refinance business.
It might be tempting to treat this comparison as a new school versus old school approach, but the reality is that these two lenders are fairly similar. SoFi has had to adjust as it has become the largest company in student loan refinancing and Citizens has had to change its approach in order to stay competitive with the new lenders.
Despite the large list of similarities between the two lenders, there are some major distinctions between the two that all borrowers should understand.
SoFi Advantages: Red Carpet Treatment and Low Interest Rates
SoFi has taken over the student loan refinance marketplace by rolling out the red carpet for their target borrowers. This includes features like US-based customer service, community events for SoFi members, and a career development office for SoFi borrowers.
In our original review of SoFi, this was one of the features that we especially liked. Rather than spending money on collections, SoFi invests the money in helping their borrowers find jobs so that they can continue to make payments.
SoFi also offers $150 to all new customers who refinance with them.
While these perks are nice, the value of any refinance ultimately comes down to interest rates. Over the years, SoFi has consistently been among the lowest of all the student loan companies. This is both in terms of the lowest advertised rate as well as the actual rates offered. It is for this reason that SoFi is near the top of our student loan refinance company rankings.
Citizens Advantages: Solid Rates from a Local Bank
Unlike the other big banks, Citizens has successfully adjusted to the highly competitive market for student loan refinancing services.
If you live in the Midwest or Northeast where Citizens Bank has a number of branches, you have the convenience of visiting an actual location to discuss your student loan issues and questions.
Citizens is also among the very best in terms of interest rates offered. Like SoFi, they have earned a reputation for consistently offering low rates and often being the company that ends up offering the best rate to the customers who take the time to shop around.
They also have built a solid reputation for prompt customer service and processing of loan applications.
Finally, Citizens is a traditional bank while SoFi falls into the “FinTech” category. Banks are usually more regulated by the government, so if there is an edge in this difference, it probably goes to Citizens.
A Key Difference
One word of caution that we would offer to prospective borrowers is to be very careful when it comes to cosigning loans.
Having a cosigner means that person is also obligated to pay back the debt. This involvement can complicate matters from a financial and personal perspective. For this reason, we strongly encourage borrowers to not involve a cosigner in this process.
Unfortunately, Citizens seems to place an emphasis on adding cosigners to the loan.
If you visit their website, one of the assumptions on the interest rate offerings is that the borrow has a cosigner. While the presence of cosigners may help them keep rates competitive with all of the new lenders, we think borrowers should focus on loans that do not require a cosigner.
The Citizens focus on adding cosigners and its three-year mandatory waiting period to remove a cosigner, is the main reason that they rank lower in our rankings.
Making a Choice Between SoFi and Citizens
Ultimately, these two companies are close enough that if you are debating between the two, it is probably best to just apply to both and find out who offers a better rate.
If it is a close call, we think SoFi should probably get the edge, but if there is money to be saved with choosing Citizens, then picking Citizens is an easy choice.
Check the rate you qualify for with SoFi here.
Check your rate with Citizens and several other student loan companies here.