Citizens Financial Group Inc. recently announced that it would offer a new fixed-rate student loan product that offered an annual percentage rate as low as 6.75 percent. Brad Conner, vice chairman of consumer lending at CFG, recently answered five questions about student loans and the new product.
PBN: Everyone knows that the cost of higher education keeps going up – what are you seeing in terms of the biggest priorities for students and their families today as they look for student loans?
CONNER: Our current student borrowers tell us that our rates are the No. 1 reason they decide to borrow from us. But before they even get to that point, they want information. We have created a website called Citizens U to help them understand not just our offerings, but other information that they need to know about student lending and other banking topics that are relevant to them.
PBN: You recently announced a fixed-rate option as part of your TruFit Student Loan offering. Is this a common offering among financial institutions? Why did Citizens take that step?
CONNER: Families today are trying to budget for college in a time of economic uncertainty, and the fixed-rate option gives them more control over their finances. Not a lot of banks are doing this yet, but we see it as being very much in keeping with the way we do business. We offer our customers a lot of choices, and want to offer the same kind of flexibility to these customers. At the end of the day, though, a low rate is just as important to students looking for a fixed-rate option as it is to students looking for an adjustable rate, which is why we are offering fixed rates as low as 6.75 percent.
PBN: You also just announced the creation of a scholarship program for students who have been volunteers in their communities. Again, is this something that’s common? What are the criteria and the scholarship amounts?
CONNER: We created the TruFit Good Citizen scholarship program to reward students who have invested their time and energy in making their communities better places to live. Twenty scholarships totaling $50,000 will be awarded to students. We will offer one grand prize of $7,500, four second place prizes of $5,000 and 15 third place prizes of $1,500. Community service is a really important part of who we are as a company, and this is an opportunity for us to recognize students who share our commitment. The application deadline is coming up pretty quickly, though, so anyone interested in applying should go to www.citizensbank.com/scholarship.
PBN: How important is brand loyalty in this part of your business? Do you find that your retail banking customers also come to Citizens Bank for student loans? And also, do the students who get loans stay on as customers after graduation?
CONNER: A lot of our customers do turn to us for student loans as their children reach college age. In many cases, we have been working with them along the way to help them save up for college through our programs like CollegeSaver and GoalTrack Savings, which can actually contribute to a customer’s savings through cash incentives and other rewards. The reverse is also true – student borrowers in many cases turn to Citizens Bank for their checking accounts and for other services, and continue to use us as their bank as they enter their adult lives. There are some financial benefits to this for the customer. Borrowers can lower their rates by 0.5 percent if they set up automatic payment from a Citizens Bank account, for example, and we also offer something called the Student Money Bundle that provides students with the services they need plus exclusive discounts, cash-back rewards and other benefits. But I think it goes deeper than that, really. I think the reason so many of our customers use us as their full-service bank is because they know who we are. They know we are a part of their local community and that we work hard to anticipate their needs and to provide great service.
PBN: How do private loans tend to fit into the mix of scholarships, grants and other sources of financing for students?
CONNER: Every student is different, but in most cases, private student loans fill the final financial gap that remains for some students when federal direct student loans, grants, scholarships and family savings aren’t enough. We limit all TruFit Student Loans to the total cost of education, minus financial aid.
