Monday, December 13, 2010
Wednesday, June 2, 2010
Thursday, February 12, 2009
Wednesday, February 11, 2009
CitiAssist Loans warning
In recent weeks, I have become aware of inconsistent and frustrating communication by Citibank customer service in regard to their CitiAssist student loan product. While there are many concerns that can be raised in regard to alternative student loans in general, students are often faced with the necessary burden of using private student loans to meet the cost of their education. Education costs have skyrocketed in the last fifteen years. Congress has made a few increases to federal loan amounts that have been inconsistent with (some would argue neglectful of) the average increases at public and private colleges. It is true that some colleges are more affordable than others, but many states do not provide the backing to make a college education reasonably accessible in terms of the cost. As a result, students have very few options to try to pay for classes and live in a place close to campus (living in even modest or run-down spaces). Therefore, many students turn to the option of using student loans with variable interest rates that are under terms set by the lender. Citibank's options for borrowers seem to be more limited than the options that other lenders provide, and I will describe a specific example further into this post. If you are thinking of using Citibank as a lender, think again and pursue a different possibility.
Most student loans, federal or alternative (a term used interchangeably with private) allow students to begin repayment after six months of grace period, following separation from the school (via graduation, student choice, or termination) or following reduced attendance below half-time. That is a nice benefit, given that it can often take awhile to secure employment. But there are other benefits, such as deferment and forbearance that serve as a status for the loan(s) that can stave off the requirement to begin repayment. These benefits do not prevent accrual of interest, and that certainly is something that banks see as a means of profit on the loan. In the case of federal loans, the government can protect the student by setting some protective regulations to which schools and lenders must adhere. As a rule, in-school deferment is offered to a borrower if he or she is going to school somewhere at a half-time course load. There are other reasons deferment might be used, such as military duty with required combat service. Forbearances are typically offered for a span of time, usually for six months to a year. If the student needs the extra time to find a good-paying job, the benefit of forbearance is definitely helpful. However, the actual length of time of the forbearance can vary, and the lender can limit the number of forbearances allowed.
Federal student loans are largely limited to direct costs of attendance, such as tuition or school-sponsored housing. Private loans are credit-based and allow for coverage of things like books, room and board, and transportation. But when it comes time to repay these loans, buyer beware! Interest on these loans can result in jaw-dropping payment amounts. When someone has used private student loans on a regular basis, the payments can be very high, often coming close to a month's rent on an apartment. With such high payments required, it seems like the borrower better land a very well-paying job in order to afford to live and make the payments. Some people have drawn a comparison of this kind of loan to a car loan. Although some of its features may seem similar, it is still a loan to a student. While a student is going to college, they are often faced with being in an awkward middle ground in certain situations. They're not really living at home any more, or if they are, they're giving their parents rent money. But federal requirements say their parents and the income they earn must be taken into account in consideration for aid. They look for work, having to take a job that will allow them to work part-time without job benefits at a job that will let them work nights and weekends. Trust me when I say they're not going to earn much. In some cases, if they have the looks, maybe they will find a job that pays better... but they may very well have to compromise their own values in the process. True, that may refer to a small number. But those in larger number have low-paying job opportunities. Some students are not able to ride off their parents' health insurance any more, but they can't afford to have their own. So they're not really able to get health care when they're sick. Most people are aware of what car repairs can do to a person's pocketbook. Auto repair really isn't offered on a sliding scale in most cases.
Now, taking this into account, Citibank is one of various lenders of alternative student loans. Someone very close to me now has incurred a good amount of debt on the CitiAssist product. He completed his bachelor's degree, after having attended full-time while working a part-time job on campus. He had no health benefits, and his parents could not help him financially. He tried earnestly to look for work with steady income in two different states after he graduated. One of the application processes took six months, and he was one of two or three candidates at the end of a process beginning with close to 100 applicants. He just wasn't the one hired. He was able to enter forbearance on his loans, but he had to rely on me first, and eventually his parents while he looked and applied to numerous places. He tried online resources, the newspapers, the temporary services, leads through friends; nothing resulted. He finally applied to a graduate studies program and was admitted. At last, he thought he could re-enter the educational environment, which he excels in, and better his chances at finding a job in this ever-worsening economy. He started as a full-time grad student, with a work-study (part-time, low income) job. He found a place to live that was cheaper than on-campus housing. He proceeded to work on putting his loans in deferment because of his full-time attendance at a school. Deferment is a routine operation. Lenders allow this across the board. However, this is where Citibank becomes a bad guy. In attempting to get a form from Citibank to put his loans in deferment, the student was told he could not use it at the graduate level. They would allow him to use one more six-month forbearance, and no more after that. He has a degree now, and they see him as employable. They are telling him he has to start paying back on that because they want their money. I am older, and I have talked to many within the student loan industry who were aghast at this. Even though it is a set of private student loans, this response is inconsistent with the practices of most competitors. With other lenders, it doesn't matter if you're pursuing education at an undergraduate or graduate level, you're still in school. Chances are that, at the end of it, your completion of a program will lead to a higher bracket of income. In turn, that would serve to make it likelier that you will repay these loans.
Most of the time, lenders are not going to see a student as a problem unless they can't reach the borrower. If the borrower remains in communication, they can typically make some arrangements or negotiate with the borrower. So, on that advice, this particular young man called them again. He talked to them about not working more than 18 hours a week now, being a full-time student, having to pay for things like rent and food, etc. The response from customer service was that they didn't have any options for him. He let them know he wouldn't be done with school for a couple of years, and he asked what would happen if his last forbearance was used and he still couldn't make their payment requirement at $500 - $600 a month. They said again that they would have to put him in collections. He asked if he could consolidate for a lower payment, and they said it would not help him to do that. He said they told him, "call us when you enter default and then we may have some options for you then." WHAT KIND OF HELP IS THAT? What kind of customer service is that? How does that work to keep the borrower calm? Sure, that may not be their problem, but adding to their default rate is. That kind of advice is atrocious. They are clearly not working with him on the matter. Well, he started looking for other work, signing up at a temp agency. Mind you, graduate programs as a rule will discourage students from working at all during the time they're taking graduate classes because of the workload. Mind you, the job market all over is bad now. With layoffs and daily mass firings, the market is glutted with jobseekers.
He received a forbearance form from Citibank, and he mailed it bank in their return envelope. Three days later, he got a call from a collections agency while he was trying to set up an appointment at a temp services company. He let the call go to voice mail and was bombarded by call after call after call. At the time they reached call number 12, he had finished setting up his appointment and answered. Citibank had put his account in collections, despite the stated intent to file the second forbearance. The collections person was insistent that he make a payment NOW. He tried to explain what his circumstances were and that he had just mailed in a forbearance form to them. He told them he could not make their required payment at this time, and that he was a full-time student. They said that was irrelevant; they wanted their money. After that frustrating call came to an end, he found out from his mother that they had contacted her because she had co-signed on one of those loans. Essentially, he is at the point of his first missed payment; the first one out of forbearance. And apparently, it did not matter that the intent of a new forbearance had been stated and communicated with their company's representatives. The collections call to his mother bullied her into making a $70 payment. He got two collections calls the next day. He went home for the weekend for a family event, and when he arrived, he found a letter had come from Citibank that had an in-school deferment form included. Why send that to him if it's irrelevant that he's in school again? He's been told already that he can't use it.
He has made the decision to drop to half-time attendance now, extending his time to graduate. He is doing this to free up some time and apply for a full-time job. There is no guarantee that he will get a job, even if he is qualified. But he's trying. He actually has had interviews. But he's in competition with hundreds of applicants now. He had talked to another representative who has said that it is not true that they won't have any other options for him before getting to the point of default. This rep said that he can consolidate and lengthen the repayment period to 15 or even 30 years, which would draw out the misery of loan repayment but drop his monthly amount to around $230-$260. So if these are possibilities, why wouldn't the lender be open to something as routine as in-school deferment. Supposedly, the stimulus package may serve to open up some possibilities to lenders. Give these borrowers a break, Citibank. You're being given a hell of one. You can afford to extend a little graciousness to your customers. Deferment is a much better option than default. Your customer service people are not furthering your success by providing horrible or inconsistent answers to callers. If someone makes the arrangements for forbearance, it is a disservice to take the action of putting the person's loans in collections (one missed payment and stated intent of an alternative you have offered, too!). Either your company's left hand isn't talking the right one, or you're just being cruel.
Most student loans, federal or alternative (a term used interchangeably with private) allow students to begin repayment after six months of grace period, following separation from the school (via graduation, student choice, or termination) or following reduced attendance below half-time. That is a nice benefit, given that it can often take awhile to secure employment. But there are other benefits, such as deferment and forbearance that serve as a status for the loan(s) that can stave off the requirement to begin repayment. These benefits do not prevent accrual of interest, and that certainly is something that banks see as a means of profit on the loan. In the case of federal loans, the government can protect the student by setting some protective regulations to which schools and lenders must adhere. As a rule, in-school deferment is offered to a borrower if he or she is going to school somewhere at a half-time course load. There are other reasons deferment might be used, such as military duty with required combat service. Forbearances are typically offered for a span of time, usually for six months to a year. If the student needs the extra time to find a good-paying job, the benefit of forbearance is definitely helpful. However, the actual length of time of the forbearance can vary, and the lender can limit the number of forbearances allowed.
Federal student loans are largely limited to direct costs of attendance, such as tuition or school-sponsored housing. Private loans are credit-based and allow for coverage of things like books, room and board, and transportation. But when it comes time to repay these loans, buyer beware! Interest on these loans can result in jaw-dropping payment amounts. When someone has used private student loans on a regular basis, the payments can be very high, often coming close to a month's rent on an apartment. With such high payments required, it seems like the borrower better land a very well-paying job in order to afford to live and make the payments. Some people have drawn a comparison of this kind of loan to a car loan. Although some of its features may seem similar, it is still a loan to a student. While a student is going to college, they are often faced with being in an awkward middle ground in certain situations. They're not really living at home any more, or if they are, they're giving their parents rent money. But federal requirements say their parents and the income they earn must be taken into account in consideration for aid. They look for work, having to take a job that will allow them to work part-time without job benefits at a job that will let them work nights and weekends. Trust me when I say they're not going to earn much. In some cases, if they have the looks, maybe they will find a job that pays better... but they may very well have to compromise their own values in the process. True, that may refer to a small number. But those in larger number have low-paying job opportunities. Some students are not able to ride off their parents' health insurance any more, but they can't afford to have their own. So they're not really able to get health care when they're sick. Most people are aware of what car repairs can do to a person's pocketbook. Auto repair really isn't offered on a sliding scale in most cases.
Now, taking this into account, Citibank is one of various lenders of alternative student loans. Someone very close to me now has incurred a good amount of debt on the CitiAssist product. He completed his bachelor's degree, after having attended full-time while working a part-time job on campus. He had no health benefits, and his parents could not help him financially. He tried earnestly to look for work with steady income in two different states after he graduated. One of the application processes took six months, and he was one of two or three candidates at the end of a process beginning with close to 100 applicants. He just wasn't the one hired. He was able to enter forbearance on his loans, but he had to rely on me first, and eventually his parents while he looked and applied to numerous places. He tried online resources, the newspapers, the temporary services, leads through friends; nothing resulted. He finally applied to a graduate studies program and was admitted. At last, he thought he could re-enter the educational environment, which he excels in, and better his chances at finding a job in this ever-worsening economy. He started as a full-time grad student, with a work-study (part-time, low income) job. He found a place to live that was cheaper than on-campus housing. He proceeded to work on putting his loans in deferment because of his full-time attendance at a school. Deferment is a routine operation. Lenders allow this across the board. However, this is where Citibank becomes a bad guy. In attempting to get a form from Citibank to put his loans in deferment, the student was told he could not use it at the graduate level. They would allow him to use one more six-month forbearance, and no more after that. He has a degree now, and they see him as employable. They are telling him he has to start paying back on that because they want their money. I am older, and I have talked to many within the student loan industry who were aghast at this. Even though it is a set of private student loans, this response is inconsistent with the practices of most competitors. With other lenders, it doesn't matter if you're pursuing education at an undergraduate or graduate level, you're still in school. Chances are that, at the end of it, your completion of a program will lead to a higher bracket of income. In turn, that would serve to make it likelier that you will repay these loans.
Most of the time, lenders are not going to see a student as a problem unless they can't reach the borrower. If the borrower remains in communication, they can typically make some arrangements or negotiate with the borrower. So, on that advice, this particular young man called them again. He talked to them about not working more than 18 hours a week now, being a full-time student, having to pay for things like rent and food, etc. The response from customer service was that they didn't have any options for him. He let them know he wouldn't be done with school for a couple of years, and he asked what would happen if his last forbearance was used and he still couldn't make their payment requirement at $500 - $600 a month. They said again that they would have to put him in collections. He asked if he could consolidate for a lower payment, and they said it would not help him to do that. He said they told him, "call us when you enter default and then we may have some options for you then." WHAT KIND OF HELP IS THAT? What kind of customer service is that? How does that work to keep the borrower calm? Sure, that may not be their problem, but adding to their default rate is. That kind of advice is atrocious. They are clearly not working with him on the matter. Well, he started looking for other work, signing up at a temp agency. Mind you, graduate programs as a rule will discourage students from working at all during the time they're taking graduate classes because of the workload. Mind you, the job market all over is bad now. With layoffs and daily mass firings, the market is glutted with jobseekers.
He received a forbearance form from Citibank, and he mailed it bank in their return envelope. Three days later, he got a call from a collections agency while he was trying to set up an appointment at a temp services company. He let the call go to voice mail and was bombarded by call after call after call. At the time they reached call number 12, he had finished setting up his appointment and answered. Citibank had put his account in collections, despite the stated intent to file the second forbearance. The collections person was insistent that he make a payment NOW. He tried to explain what his circumstances were and that he had just mailed in a forbearance form to them. He told them he could not make their required payment at this time, and that he was a full-time student. They said that was irrelevant; they wanted their money. After that frustrating call came to an end, he found out from his mother that they had contacted her because she had co-signed on one of those loans. Essentially, he is at the point of his first missed payment; the first one out of forbearance. And apparently, it did not matter that the intent of a new forbearance had been stated and communicated with their company's representatives. The collections call to his mother bullied her into making a $70 payment. He got two collections calls the next day. He went home for the weekend for a family event, and when he arrived, he found a letter had come from Citibank that had an in-school deferment form included. Why send that to him if it's irrelevant that he's in school again? He's been told already that he can't use it.
He has made the decision to drop to half-time attendance now, extending his time to graduate. He is doing this to free up some time and apply for a full-time job. There is no guarantee that he will get a job, even if he is qualified. But he's trying. He actually has had interviews. But he's in competition with hundreds of applicants now. He had talked to another representative who has said that it is not true that they won't have any other options for him before getting to the point of default. This rep said that he can consolidate and lengthen the repayment period to 15 or even 30 years, which would draw out the misery of loan repayment but drop his monthly amount to around $230-$260. So if these are possibilities, why wouldn't the lender be open to something as routine as in-school deferment. Supposedly, the stimulus package may serve to open up some possibilities to lenders. Give these borrowers a break, Citibank. You're being given a hell of one. You can afford to extend a little graciousness to your customers. Deferment is a much better option than default. Your customer service people are not furthering your success by providing horrible or inconsistent answers to callers. If someone makes the arrangements for forbearance, it is a disservice to take the action of putting the person's loans in collections (one missed payment and stated intent of an alternative you have offered, too!). Either your company's left hand isn't talking the right one, or you're just being cruel.
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