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

 September 18, 2020
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Private Student Loan rates starting at 2.49% APR

2.49% to 13.85% 1

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2.55% to 11.44% 2

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3.25% to 13.59% 3

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  • Variable APR

Note that the government has paused all repayment on federally held student loans through the end of 2022, with no interest to be charged during that period and no loans to be held delinquent or in default.

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Bigger may be better for some borrowers, but for others, it could mean worse. To gauge whether big-bank student loan consolidation is right for your situation, let’s review some pros and cons of taking out educational debt with a major financial institution.

Pros of big bank student loan consolidation

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

Here are three ways in which bigger is generally better.

1. You can keep your finances under one roof
2. Your servicer could be less likely to change
3. Your application may be more likely to be accepted

1. You can keep your finances under one roof

If you already bank with a large institution, you may have a friendly face to go to with questions. If you’re happy with the service you receive on your checking and savings accounts, it could make sense to pursue big bank student loan consolidation with a lender you know and trust.

There could also be financial rewards for holding multiple accounts at the same bank. Citizens Bank, for example provides two types of discounts for student loan refinancing customers:

Discount Requirement
0.25% Prior student loan or other qualifying account with the bank
0.25% Enroll in automatic payments

You can typically open these bank accounts at any time before finalizing a loan to receive the lower rate.

2. Your servicer could be less likely to change

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

That’s not to say larger banks with student loans are immune from going under, but they likely have a better chance of staying in business. What does that mean for borrowers? Service that won’t be interrupted.

Smaller lenders with shorter track records can’t give people the same comfort. Bloomberg reported in May 2017, for example, that fintech lender Earnest was seeking to be bought by another company. Within six months, Earnest was wrapped in the arms of Navient, a much-maligned federal loan servicer and industry stalwart. The transition undoubtedly made at least some Earnest customers wary.

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

With that said, don’t discount attractive offers from other, lesser-known lenders. Just make sure to carry out the due diligence of reading the loan agreement. It should include language about how the loan would be affected if its servicer changes hands.

Also, realize that it’s impossible to have complete control over who manages your student debt. Even your federal loan servicer can change at a moment’s notice.

3. Your application may be more likely to be accepted

Because big banks have been around longer and attract more customers, it shouldn’t be surprising that their standards can be lower. In their eyes, you may not need as high of a 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 only eclipse $24,000 — a lower figure than charged by other top-rated lenders.

Finding the exact baseline for each bank is more complicated than it sounds. Lenders consider this proprietary information and aren’t always willing to share, say, how low of a credit score you can have and still be approved.

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

Also, temper this pro with a potential con: While an application may be more likely to get accepted at a big bank, having a more creditworthy application is a big deal. It helps you score more attractive loan rates and terms, no matter the size of the lender.

Cons of big bank student loan consolidation

If there wasn’t a single downside to big bank student loan consolidation, all these smaller, newer companies wouldn’t keep springing up, competing for your business.

Here are three ways that a big bank’s student loan could work against you.

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

1. You could spend more time waiting in line, online

As is the case in many of these categories, comparing lenders is a numbers game. And while it varies lender to lender, big or small, it typically takes longer to apply with larger banks. There’s more digital red tape to cut past.

For example, Discover boasts that you can apply for student loan refinancing in under 15 minutes on its site. Newer lenders including College Avenue student loans say three minutes is all you need.

With that said, the arrival of fintech companies and their increased competition has 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-oriented millennials — but both outsource their loan application process to the same company, CampusDoor.

If you’re considering borrowing from a big bank, give their technology a spin. And if you’re looking at other lenders who proclaim their tech savviness, confirm their credentials by first looking under the hood.

2. Slow customer service might be a drag

If you’ve visited a big bank’s website looking to learn about student loan consolidation, you might have tried testing out its customer service. If it has an online chat service, its human or bot representative might rattle off some perks, such as student loan cosigner release, that other lenders offer. While the answers are sometimes unsatisfying, the service isn’t.

Unfortunately, many big banks advertising student loan consolidation have no chat function whatsoever. Instead, they ask you to dial into an automated phone system.

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

No matter which lender you decide to go with, make sure to vet student loan refinance companies properly by consulting existing customers’ reviews. Only they can be a true barometer of what to expect from your lender’s customer relations quality.

3. You might see higher rates and fewer term options

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

Below are examples of variable APR rates for consolidating student loans. The first one is from a big bank; the next two aren’t. Who doesn’t measure up?

  • PNC: Rates start from 1.46%
  • SoFi: 3.24% to 8.24%
  • Splash Financial: 2.49% to 11.52%

That’s an admittedly small sample size, so it’s important to compare specific rates you’re quoted while shopping around.

No matter a given lender’s size, ensure that each offers the kind of rates — and other consolidation repayment terms — you deserve and the term you prefer.

As the examples above show, working with a big bank might be right for you but bad for your neighbor. Before deciding on your lender, consider our list of pros and cons carefully. Better yet, use it as a starting point to come up with your own list — then find the student loan refinance lender that fits your situation best.

Need a student loan?

Check out our top picks below or learn more about other ways to pay for college.
Variable APRDegrees That QualifyMore Info
2.49% – 13.85%1 Undergraduate

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2.55% – 11.44%2 Undergraduate

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3.25% – 13.59%3 Undergraduate

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0.00% – 23.00%4 Undergraduate

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3.25% – 9.69%5 Undergraduate


N/A 6 Undergraduate

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