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Citibank Student Loans: Its Closure and Alternatives

citibank student loans

When students make decisions for their educational lives, they know the huge expenses waiting in line. Many students cannot afford those expenses and rely on different financial assistance programs. Government-provided grants, scholarships, and student loans are highly preferred to fund education due to their low costs. However, not all students qualify for such benefits. Some of the students will be required to get help from personal lenders. Sure, it is not a desirable option due to its higher interest rates and non-existence of forgiveness programs. Yet, some lenders offer better loan terms than others. Citibank student loans, with years of experience, have long helped students to fund their education. It offered student loans to graduate and undergraduate students with attractive rates and flexible repayment options. However, it ended its student loan program. 

Hence, students in need of funding should find alternatives to Citibank to get loans. This guide will discuss the features of ended Citibank student loans and present some other solutions to people in need of funding or debt release.

Citibank Student Loans: What Happened? 

In 2010, Citibank stopped its CitiAssist student loans and sold the majority of the loans to its competitor called Discover. Citibank still offered some student loans till 2017, when the lender completely stopped serving college loans. The lender sold all such loans to another competitor- Firstmark Services. 

Selling the loans to another company does not mean that the borrowers are free from their obligations. The borrowers should still pay for their Citibank student loans. If you are one of those students and want to decrease your obligations, keep reading our guide for help.

Discover- The Lender

citibank student loans

As mentioned, Citibank sold many of the loans to Discover. Discover currently offers different student loan types. These categories include undergraduate loans, graduate loans, loans for law students, health professionals, residency, relocation or review, etc. This Citibank student loan alternative offers multiple advantages. First, even students who lack credit scores can qualify for debt because the lender provides different cosigner options. Cosigners can guarantee the repayment for borrowers with low to no credit performance.

Besides, student loans have lower interest rates. Borrowers in need of such attractive loans can apply online and receive the loan in a short time. While studying, the students are not required to make payments. If a borrower agrees to Auto-pay to ensure monthly loan payments, he/she can receive a small interest rate reduction. 

Additionally, there is no minimum limit for the loans, which means students could borrow as little as they want. 

Loan Rates

This Citibank student loan alternative is relatively easy to repay because it offers multiple repayment options with lower interest rates. The borrowers can receive variable or fixed-rate loans. The interest rates depend on the category of loans- whether fixed or variable, whether for graduate, undergraduate, law, etc. For undergraduates, the variable category starts from 1.24%, while fixed APRs start from 4.24%. 

However, these rates are slightly higher for graduate students, starting from 1.99% and 4.49%, respectively. Parents can also finance their children’s education with loans of 3.99% and 5.49% for variable and fixed rates. 

It should also be mentioned that this Citibank student loan alternative provides interest reduction for the auto-pay feature and good grades.

The Reward for Good Grades

Students with good grades can get a cash reward for their student loans. Such students can only qualify once, and their cumulative Grade Point Average should be a minimum of 3.0. It is possible to get 1% of the amount that the school certifies as a cash reward. The students should be the U.S or permanent citizens with loans.

There is a time limitation to reimburse the reward. For example, if you are an undergraduate student, you should redeem the reward during the first six months after the disbursement. The good news is that if your grades are affected by the COVID-19 pandemic, you can still qualify by eliminating the second-semester grades from the 2019-2020 academic year transcript. 

Repayment

The repayment of this Citibank student loan alternative takes 15 years. The borrowers are not required to repay the debt till six months after graduation. However, interest can continue accumulating. It is possible to choose interest-only payments or $25 fixed interest for undergraduate students while studying or in the grace period.

Graduate students are not required to repay the student loan debt till nine months after graduation, or they can also choose to repay $25 each month or only the interests. Keep in mind that conditions change depending on which type of loan you need. Therefore, it is advisable to check the official Discover website. 

Citibank Fines

Citibank student loans have long been problematic. An investigation started in 2006, which lasted for 11 years against Citibank. The investigation claimed that Citibank misled the borrowers, charged late fees improperly, and required more monthly payments than needed. 

As a result, the investigation required Citibank to pay a $6.5 million penalty in 2017. $2.75 million out of the total amount was fine, while the rest was required to be paid to harmed customers. Many customers got a refund for the incorrect payments. Even the Citibank student loans sold to Discover were involved in the refund process. 

What Options Do I have?

how to refinance your student loans

If you are looking for a source of debt to finance education, there exist several options. Federal loans and private loans are available to such students. Federal loans are usually more desirable than private loans due to a few benefits.

First, federal loans are usually cheaper as the government provides them. In most cases, federal loans do not require a credit check which is difficult for students without a credit history to qualify. Next, the government provides opportunities to reduce or eliminate the debt. Different forgiveness programs exist to help students repay their debt which is not accessible to private student loan borrowers. 

What is the Current Interest Rate for Student Loans?

The current interest rate for student loans changes depending on the loan type. Let’s focus on federal loans. Their interests are fixed. The undergraduate loans have 2.75%, while graduate loans have 4.30%. Federal Parent loans require 5.30%. Regardless of the loan type, federal loans are mostly cheaper alternatives to private loans.

Additionally, federal loans bring forgiveness opportunities, like Public Service Loan Forgiveness, Teacher Loan Forgiveness, or various discharge programs. Unfortunately, for private borrowers, these programs are not accessible. Only a few private lenders allow discharging the debt due to the death or total and permanent disability.

How can I Get Rid of My Private Loan Obligations?

If you struggle with Citibank student loans payment, you have several options. There exist almost no forgiveness programs to get rid of the debt obligations. However, borrowers can ease the repayment process and get more affordable rates through refinancing.

Student loan refinancing involves getting new student loans and using the proceeds to pay out the existing loans. It is useful in many cases. For example, imagine you have Citibank student loans, but Citibank sells your loans to other lenders. Each lender has its own conditions and operations. Hence, you might not like the new lender. In this case, you can get a new loan from another lender whom you prefer to pay out the Citibank student loans.

Additionally, if the interest rates are declining, you can save money by refinancing. Your new loan will have lower interest than the existing one. Refinancing also benefits if the borrower is not happy with the loan’s variability and wants to get a fixed loan or vice versa.

Eligibility Conditions

Student loan refinancing requires several conditions, but the most important qualifications are stable income and high credit performance. These two can be challenging for a student to qualify because they might not have a job or a reliable credit history. 

Hence, in most cases, refinancing companies ask for a cosigner who can take the responsibility of repayment if the borrower fails to obey the obligations. The cosigner should also meet the eligibility criteria. For example, he/she should also have a satisfactory credit score which is usually higher than 600.

How to Refinance Your Student Loans?

First, you need to find a desirable lender to refinance student loans. Check the private lender’s website to assess their loan terms. Next, you need to ensure that you qualify for the refinancing loans. If you apply and get rejected, your credit performance can be influenced negatively. Hence, it is better if you use “pre-qualification” tools. 

Some private lenders provide this tool on their official websites. The borrowers can check if they qualify for a refinancing loan and what the interest rate will be by submitting the required information. Sure, the estimations are not 100% accurate, but it is a good start to evaluate applications’ consequences. 

Contact the Lender

how to refinance your student loans

Another solution for any private student loan borrower is contacting the lender directly. Lenders appreciate honest borrowers who take responsibility and inform the organization about the payment struggles. If you inform the lender on time that you might not be able to meet the obligation for next month, the lender might suggest a solution. 

For example, some companies grant student loan forbearance status. During forbearance, the borrower is not obliged to make monthly payments. However, keep in mind that it has some disadvantages. First, it is a short-term solution. Usually, it is possible to stop repayment for only a few months. Second, even during loan forbearance, the interest payment will accumulate. Hence, the borrowers should consider the pros and cons before accepting any help. 

In very rare cases, lenders can decrease the monthly payment amounts to help borrowers. However, it is very likely that they will grant this favor for a short time, too. 

Keep in mind that pressuring the lender, talking disrespectfully, or demanding any favor is not helpful in this case. The lender is not obliged to accept a favor request in any condition. Try to be polite and explain the challenges clearly to convince the lender.

Bankruptcy – Be Cautious!

Another possible solution to private student loan borrowers can technically be student loan bankruptcy. However, this solution should be your last resort because it brings more disadvantages than advantages. 

Bankruptcy is helpful to eliminate debt obligations. Yet, its drawbacks last for years. First, it is extremely hard to declare bankruptcy for student loans. Student loans are not much suitable for such a solution. Besides, proving that paying your debt will be a barrier to survival is a tough task. For example, if you have a phone or you get a drink from a cafe from time to time, you might lose your eligibility for this solution. 

Additionally, the negative effect of bankruptcy will stay in your credit report for as long as ten years. People with such negative credit history events usually face challenges when they want to rent accommodation, get a job, insurance, or a new credit line. Hence, think several times before considering this option.

Final Words

Citibank has years of experience in student loans. Unfortunately, Citibank student loans have ceased for now. Most of the student loans are sold to different competitors like Discover or Firstmark Services. If you need a personal loan, you might not get it from Citibank, but there exist different alternatives. 

This guide explained the terms for Discover lender, but you can check other lenders and their conditions online. Besides, in all cases, we suggest borrowers consider federal loan options as their interest rates are lower, and they allow forgiveness programs. However, understandably, if the federal loans are not accessible, private loans are satisfactory alternatives.

If you have existing Citibank student loans, you can refinance your loans to save money. Differently, you can contact your current loan holder to learn about your options during financial challenges. However, the lenders usually grant only short-term solutions. If you want a more sustainable solution to your debt struggles, you can request a free consultation from our debt specialists. Our debt experts have years of experience and can easily develop a debt resolution strategy to stop your loan concerns.