Millions of Americans could put more money in their pockets each month by refinancing their student loans. It's always been possible to refinance private student loans, but few financial institutions offered this service.
In January, RBS Citizens Financial Group, which operates Citizens and Charter One banks, introduced a new Education Refinance Loan, with fixed rates as low as 4.75 percent APR and variable rates starting at 2.8 percent APR. There are no application, origination or disbursement fees and you don't have to be a bank customer to apply for this refinance.
"These are very aggressively priced and typically a much better rate than a loan you can take out when you're in school," said Brendan Coughlin, head of education and auto finance at RBS Citizens Financial. "For a vast number of students who have private student loan debt, this will dramatically improve their payments and the interest they pay over the life of their loans."
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Coughlin said the company sees this as a very big business opportunity and a way to build lifelong relationships with students and their families.
Citizens and Charter One will only refinance private loans. SoFi, a student loan company based in San Francisco, will also refinance government loans. SoFi has refinanced $400 million in student loans since 2012.
"And that's just the tip of the iceberg," said SoFi's CEO, Mike Cagney. "There are hundreds of billions of student loans out there that have a great potential to be refinanced and we hope to get the word out."
Cagney told me the average customer saves between $5,000 and $9,000 over the life of the loan.
Gil Eyal is glad he heard about SoFi. After getting his MBA from Northwestern University, Eyal moved to Hoboken, N.J., and worked on a social media start-up. He refinanced $100,000 in federal loans with SoFi—from 8.5 percent to 6 percent—and cut his monthly payment by $500.
"We were barely breaking even," Eyal said. "Now, we can save some money every month, which definitely gives us breathing room and the ability to have the paycheck go a little further."