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Big Bank Student Loan Consolidation: Review These 6 Pros and Cons

Note that the student loan situation has changed due to the impact of the coronavirus outbreak and the relief efforts of the government, student loan lenders and others. Check out our Student Loans Hero Coronavirus Information Center for news and additional details.

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Bigger may be better for some borrowers, but for others it could mean worse. To assess whether consolidating student loans with a large bank is right for you, let’s take a look at the pros and cons of taking on student loan debt with a large financial institution.

Benefits of consolidating student loans at major banks

The differences between federal and private loans can already be obvious. But what about the distinctions between large banks and smaller lenders that offer similar products?

Here are three ways bigger is usually better.

1. You can keep your finances under one roof
2. Your repairman might be less likely to change
3. Your application is more likely to be accepted

1. You can keep your finances under one roof

If you’re already banking with a large institution, you might have a friendly face to turn to with questions. If you are happy with the service you receive on your checking and savings accounts, it might be a good idea to pursue student loan consolidation with a major bank with a lender you know and trust.

There might also be financial rewards for holding multiple accounts at the same bank. Citizens Bank, for example, offers two types of rebates to customers refinanced with student loans:

Delivery Requirement
0.25% Previous student loan or other eligible account with the bank
0.25% Sign up for automatic payments

You can usually open these bank accounts anytime before finalizing a loan for the lowest rate.

2. Your repairman might be less likely to change

If we’ve learned anything from the Great Recession, it’s that “too big to fail” is true. Major banks offering student loan consolidation were among financial institutions receiving bailouts from taxpayers, including PNC ($ 7.6 billion) and Discover ($ 1.2 billion), according to CNN.

This doesn’t mean that the big banks with student loans are immune to bankruptcy, but they probably have a better chance of staying in business. What does this mean for borrowers? Service that will not be interrupted.

Small lenders with shorter track records cannot give people the same comfort. Bloomberg reported in May 2017, for example, that fintech lender Earnest was looking to be taken over by another company. In less than six months, Earnest was enveloped in the arms of Navient, a much maligned federal loan manager and industry mainstay. The transition has undoubtedly made at least some Earnest customers suspicious.

If having your loan sold to another lender isn’t a problem you want to deal with, put a +1 in the column for large banks with student loans.

That said, don’t overlook attractive offers from other lesser-known lenders. Just make sure you do your due diligence when reading the loan agreement. He should include wording on how the loan would be affected if his agent changed hands.

Also, be aware that it is impossible to have full control over who manages your student debt. Even your federal loan manager can change at any time.

3. Your application is more likely to be accepted

Because big banks have been around longer and attract more customers, it shouldn’t be surprising that their standards may be lower. In their eyes, you might not need such a high credit score or annual income to be approved for a loan.

To qualify for student loan refinancing at Citizens Bank, for example, your minimum income must eclipse only $ 24,000, a figure lower than that charged by other top-rated lenders.

Finding the exact baseline for each bank is more complicated than it looks. Lenders take this proprietary information into account and are not always willing to share, for example, how low you can have a credit score while being approved.

Other lenders, including a relatively large bank like First Republic, may not set a minimum at all. They take a variety of factors, including your credit history and debt-to-income ratio, into account when deciding whether or not to lend. Go through the process of applying for banks with student loans to learn more.

Additionally, temper this advantage with a potential disadvantage: While an application is more likely to be accepted at a large bank, having a more creditworthy application is a big deal. It helps you get more attractive rates and loan terms regardless of the size of the lender.

Disadvantages of consolidating student loans at major banks

If there wasn’t a single downside to student loan consolidation at the big banks, all of those smaller, newer businesses wouldn’t keep popping up, vying for your business.

Here are three ways a major bank student loan could work against you.

1. You could spend more time in line.
2. Slow customer service can be a drag
3. You might see higher rates and less term options

1. You could spend more time in line

As with many of these categories, comparing lenders is a numbers game. And while it varies from lender to lender, large or small, it usually takes longer to apply to the big banks. There is more digital paperwork to be avoided.

For example, Discover boasts that it can apply for a student loan refinance in less than 15 minutes on its site. Newer lenders, including College Avenue Student Loans, say three minutes is enough.

That said, the arrival of fintech companies and their increased competition have forced older banks with student loans to modernize their service. A mainstay like PNC and a relative newbie Laurel Road, for example, have very different reputations among tech-savvy millennials – but both outsource their loan application process to the same company, CampusDoor.

If you are considering borrowing from a major bank, try their technology. And if you look at other lenders who proclaim their technological know-how, confirm their credentials by looking under the hood first.

2. Slow customer service can be a drag

If you’ve visited a major bank’s website looking for information on student loan consolidation, you may have tried testing their customer service. If they have an online chat service, their human or robot representative might offer you certain benefits, such as student loan co-signer release, which other lenders offer. While the responses are sometimes unsatisfactory, the service is not.

Unfortunately, many of the major banks that advertise student loan consolidation do not have a chat function. Instead, they ask you to log into an automated phone system.

It’s fair to be skeptical and assume that the big banks can generally be slower or less helpful in servicing a loan. After all, most offer so many other products (from banking to investment) that they can’t be as responsive as a small lender that only has one type of product to manage.

Whichever lender you decide to engage with, be sure to check out student loan refinancing companies by looking at reviews from existing clients. They alone can be a real barometer of what to expect in the quality of your lender’s customer relationship.

3. You might see higher rates and less term options

Some differences between small and large banks offering student loans are easy to spot. Interest rates are an obvious place to start – they’re easy to compare between lenders and directly affect the cost of your loan.

Below are examples of variable APR rates for student loan consolidation. The first comes from a big bank; the next two are not. Who is not up to the task?

  • Cabin crew: Prices from 1.46%
  • SoFi: 2.25% To 6.39%
  • Financial splash: 1.88% To 6.15%

This is a small sample size, so it is important to compare the specific rates that are offered to you when shopping.

Regardless of the size of a lender, make sure that each offers the type of rate (and other consolidation repayment terms) you deserve and the length of time you prefer.

As the examples above show, working with a big bank can be good for you, but bad for your neighbor. Before choosing your lender, carefully review our list of pros and cons. Better yet, use it as a starting point to build your own list, and then find the student loan refinance lender that best fits your situation.


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