College education is getting more expensive all the time. As a result, many graduates have large amounts of student loan debt at graduation. These loans can be at high interest rates compared to mortgage interest rates. The financial weight of the loan payments can negatively impact the recent graduate’s ability to move ahead financially, such as saving for a down payment to buy a home or qualifying for a home loan or putting money into their 401(k).
First Republic Bank (FRB) has the lowest rates we have ever seen for student debt consolidation. Keep in mind that this is not for new student loans. The program is to refinance existing loans to lower rates for those that have graduated and started working and are in the payback period.
First Republic Bank is offering really low fixed interest rates, but not everyone will benefit from their low-cost offering. For those that do qualify and are ok with the requirements these interest rates can be over half of a borrower’s current rates.
To benefit from these low interest rates, the loans do have some requirements and you should consult with FRB for all the specifics, but below are some of the requirements:
High Loan Balance Requirement – The minimum balance to refinance is $40,000 and the maximum is $300,000. Those that attended graduate school or professional school are great candidates for these loans.
Checking Account Required – First Republic requires the borrower to open a checking account, which is not uncommon. But their opening balance and the average monthly balance is more than most to avoid a monthly service charge. First Republic also requires direct deposit of wages.
Excellent Credit Required – A borrower needs a good credit score to qualify.
Automatic Debit Requirement – This is an automatic monthly payment requirement from your checking account. Some online sites make a big deal of the automatic payment, but since you are going to make the payment anyway and your interest rate is often half of what it was, this requirement does not seem like a big issue.
Work Experience Requirement – To qualify to refinance your student loans you need more than 24 months of experience in your industry.
Geographic Availability – Unlike many other student loan refinancing programs, First Republic borrowers have to complete the application process in person at a local branch. If one is not near a branch, this could be a limitation.
FRB All-In-One Loan is not actually a student loan. – This can be important because borrowers will not be able to deduct student loan interest on their taxes. Second, this loan offers no deferment or forbearance options. Also, if you refinance a federal student loan, you will never be able to utilize programs like student loan forgiveness or income-driven repayment plans. Lastly repayment terms may be less forgiving than with other lenders.
It seems clear that FRB is offering these low interest rates for student consolidation loans in an attempt to develop banking relations with graduates that have good credit, have a developing career and will need expanded banking service in the coming years.
As long as you can qualify and can live with the terms of the loans, it seems like a slam dunk! It can save a borrower thousands and even tens of thousands of dollars in interest charges over time.
If you, your kids, or anyone you know, have student debt this is a program that should be highly considered.