How Citizens Bank’s Multi-Year Approval Could Make Borrowing Easier

citizens bank private student loan

Every time you secure private or federal student loans, you’re funding a single year of your education. Almost every time, that is.

Citizens Bank is the only known lender to offer multi-year approval to its borrowers. You could be approved for as many as four years’ of loans, all at once.

“This (addresses) the biggest pain point we hear from families,” said Christine Roberts, head of student lending at Citizens Bank, in a phone interview. “The uncertainty they wouldn’t get the money they needed every year to finance their children’s educations.”

Let’s learn more about multi-year approval by looking at its three main benefits, plus three things you should consider. They can help you determine whether a Citizens Bank private student loan is right for you.

3 reasons to consider Citizens Bank’s multi-year approval

Private loans as a whole have their own set of pros and cons, but let’s narrow our focus to the potential positives of utilizing Citizens Bank’s multi-year approval feature.

1. One application with one hard credit inquiry

When you apply for a private loan, the lender will likely make a hard inquiry into your credit history to verify your creditworthiness. The hard check could drop your credit score by as much as five points.

Citizens Bank’s multi-year approval ensures your report would only be affected by a single hard credit check. The bank performs annual soft credit checks (which don’t affect your score) after you’ve met the initial qualifications, Roberts said.

One application with a single promissory note also means less paperwork. After completing a Citizens Bank private student loan application — a process that usually takes less than 20 minutes — you will receive one of four possible results, Roberts said.

  1. Approved for a single-year loan
  2. Approved for a multi-year loan
  3. Rejected for a loan
  4. Asked to provide a cosigner

If your application is worthy of a multi-year approval, you would be eligible to receive money for as many as four years for an undergraduate student, or two to four years for a postgraduate student, Roberts said.

It all depends on what stage you’re at in your education. A college sophomore could be approved for three years, for example.

You (and your cosigner, if you have one) would be required to provide the following information in your one-time application.

  • Recent pay stub or other proof of income, plus a monthly housing payment
  • Graduation date, loan period, and the loan amount
  • Name, date of birth, and Social Security number
  • Name of school, cost of attendance, and any financial aid received
  • A personal reference

Remember that you may apply for loans from other private lenders, though that means you may get hit with additional hard credit checks. Still, you don’t have to stick (or maintain an exclusive borrowing relationship) with Citizens Bank for multiple years.

2. Opt out without penalty

Just because you receive multi-year approval doesn’t mean you have to take out a Citizens Bank private student loan every year you’re in school. There are no fees or penalties for opting out, Roberts said.

College freshmen borrowing from Citizens Bank, for example, could still switch to another lender at any time. They could be motivated by, say, a lower interest rate at a competing lender.

It’s also important to think about how many years you will be enrolled in school. More than 60 percent of students who entered a bachelor’s degree program in the fall of 2009 didn’t graduate within four years, according to the National Center for Education Statistics.

Realize that a four-year approval may not keep you covered, even if you do stick with Citizens Bank for the duration of your education.

3. The lone multi-year feature on the market

Citizens Bank started developing its multi-year approval feature in the middle of 2013 when other private lenders were either just joining the industry or still developing basic products. That’s one reason it’s the only bank currently offering multi-year approval, Roberts said.

The bank’s underwriting model includes a host of factors it uses to evaluate applicants’ creditworthiness. The aim is to cater to applicants with different strengths, Roberts said. But the typical qualifying factors still carry heavily in the bank’s proprietary algorithm, she added.

“If you feel you have a good credit score with a reasonable debt-to-income ratio,” Roberts said, “then you’d be a perfect fit for this.”

3 considerations for Citizens Bank’s multi-year approval

No loan product is a perfect fit for everyone. While Roberts said that Citizens Bank’s research and focus-group feedback yielded no disadvantages of multi-year approval, it’s important to consider that its loan may be no better or worse than traditional, single-year private loans.

The following three factors would also be true of private loans from many other top-rated lenders.

1. Changing variable and fixed rates

The multi-year approval program was unveiled with a variable interest rate in June 2015. Then, last month, Citizens Bank launched it with a fixed rate.

Roberts said she expected 65 to 70 percent of multi-year approved borrowers to take a fixed rate.

Under the bank’s feature, your interest rate would be frozen for one year but not for multiple years, Roberts said. If you’re a college freshman, for example, here’s what your Citizens Bank loan terms could look like for four years.

  • Freshman: $10,000 at 5.50% APR
  • Sophomore: $10,000 at 6.50% APR
  • Junior: $10,000 at 6.00% APR
  • Senior: $10,000 at 5.75% APR

To clarify, fixed rate changes only reflect the market, not your (or your cosigner’s) credit, said the bank’s spokeswoman.

If you choose a variable rate: As long as you remain in school and creditworthy, your variable rate range stays the same, Roberts said. But the range is expansive. In June 2017, Citizens Bank’s variable APRs spanned between 4.03% and 10.48%.

There is some built-in flexibility, however. A borrower could go with a variable rate for their freshman year loan, for example, before switching to a fixed rate as a sophomore, according to the bank’s spokeswoman.

Having some flexibility is as important as ever. This summer, the Federal Reserve announced that rates were ticking up.

Given that you’re not locked in and Citizens Bank’s private student loan rates can change annually, shopping around and rate-comparing would remain a wise choice for every borrower. Going to the trouble of filling out an application with another lender could save you significant money over the long haul.

2. Multi-year approval is subject to annual review

It may seem like a contradiction, but Citizens Bank’s multi-year approval feature only guarantees year-to-year approval. The lender uses soft credit checks annually to ensure you and your cosigner remain eligible.

“It is possible an additional request for funds would not be granted if (the borrower or cosigner is) no longer eligible for the feature,” the bank spokeswoman clarified via email.

So while you may be told you’ve been approved for a specific number of years, that approval is not set in stone.

If you’re an undergraduate, imagine a scenario where your cosigner falls on hard times. Maybe your cosigner loses a job and falls behind on a credit card bill.

While this type of situation isn’t likely, it is possible. So as you consider multi-year approval, understand what that term really means.

3. One application, but multiple loans

Each school year that you request a Citizens Bank private student loan using the multi-year approval feature, the lender confirms that you’re still enrolled. It then sends the funds directly to your school.

Each time that process happens, you’re receiving a separate loan.

One positive is that your multiple loans would still be held by the same bank. That makes repayment easier down the road. Borrowers would receive one monthly statement and make one payment, which would be allocated proportionally to each loan, the Citizens Bank spokeswoman said.

Still, this means that even borrowers who were approved for multiple years may end up needing or wanting to consolidate or refinance student loans.

Is a Citizens Bank private student loan right for you?

You should max out federal student loans first. They come with income-driven repayment options and loan forgiveness programs, and they typically don’t require a cosigner. The interest rates are also usually lower compared to private loans.

Another important distinction is that most federal loans aren’t dependent upon your credit history (or the history of your cosigner). While you do have to apply each year for a new round of funds, you’re not at risk of losing eligibility over a worsening credit report.

After federal aid, private loans are a resource for students looking to fill any funding gaps. If you fall into this bucket, consider Citizens Bank’s offering.

Its multi-year approval feature may get you in the door, but ensure the bank’s rates, terms, and service are competitive before deciding to stay.

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