by Debbie Schwartz, Founder of Road2College
Note: This article is sponsored by Citizens®. Road2College maintains editorial control over content and recommendations.
Every year, the same questions surface in our Paying for College 101 Facebook community of 310,000+ families. Not the definitional ones. Families figure out what a loan is. The questions that keep coming back are the ones where the answer is genuinely counterintuitive, and where families tend to find out the hard way.
We collected the questions our community asks most and put them to Citizens, a private student lender. Below are the answers, along with our own take where applicable. The questions where the answer surprised us are the ones we’d read first.
Do we have to apply for a private loan again every year?
Yes, almost always. Most private lenders require a full new application each academic year, including a new hard credit inquiry. Families tend to think of a private loan as one decision made during senior spring. It is closer to four decisions made four years in a row.
That matters for two reasons. Your credit profile and your co-signer can change over four years, and so can the rate you qualify for. And repeated hard inquiries, spread across four separate application cycles, are not treated the same way as inquiries clustered within a single shopping window.
A small number of lenders offer alternatives. Some credit unions offer an education line of credit, approving a set amount for the full college career at once. Citizens offers what it calls Multi-Year Approval†, which, according to Citizens, determines funding eligibility across all four years or the length of the degree program without a new hard credit check or income verification each year.
Our take: if a multi-year option is on the table and the rate is competitive, factor it in. Three fewer applications and three fewer credit inquiries have real value that does not show up in an APR comparison.
What happens if the cosigner dies or becomes disabled?
It’s a tough question to think about but an important one for families to consider. Federal and private loans handle this very differently, and the private side tends to be where families could run into challenges. Federal Parent PLUS loans are discharged if the parent borrower dies, and also if the student dies. Total and permanent disability can qualify a federal loan for discharge through a separate application.
Private loans vary by lender and by when the loan was originated. Historically, many private loan contracts included an auto-default clause: if a cosigner died or filed for bankruptcy, the full balance could become due immediately, even with a perfect payment history. Public pressure and state-level action have pushed many major lenders away from the practice, but the terms still live in the promissory note, not the marketing page.
Our take: This is the single most important question in this article and the one almost nobody asks. Before signing with any private lender, ask directly what happens on cosigner death or disability. You are looking for one of three answers: the loan is discharged, it converts to the student’s sole responsibility, or it can accelerate. Get it in writing.
When does interest actually start accruing?
On private loans, interest typically starts accruing when the money is disbursed to the school, not when the loan is approved. Getting your loan approved in March for a September disbursement does not start the clock in March. Families frequently assume otherwise and rush decisions because of it.
Federal loans split. Subsidized loans accrue no interest while your student is enrolled at least half-time, during the six-month grace period, or during deferment. Unsubsidized loans accrue from the day of disbursement, and if that interest is not paid along the way, it capitalizes into the principal when repayment begins.
Our take: if your student’s package includes unsubsidized loans and your family has any flexibility, pay the interest while they are still in school. It is a small predictable payment now instead of a compounding one later. This is the highest-leverage move most families never make. And when the student makes those payments, the on-time history helps them build credit before graduation. This is the highest-leverage move most families never make.
If we accept a loan and end up not needing it, can we give it back?
Yes, with different rules by loan type. Federal loans can be returned within 120 days with no penalty. Private loans can generally be returned too, but whether interest is charged depends on the lender and the timing.
According to Citizens, its loans can be returned without interest charges within 60 days. Other lenders set their own windows. Ask before you accept, not after.
How do we compare offers without wrecking a credit score?
Clustering your applications could help you to avoid this issue. Most credit scoring models treat multiple student loan inquiries within roughly a two-week window as a single inquiry, on the assumption that you are shopping for one loan rather than opening several. Spread those same applications across two months, and they can count separately.
Two related habits worth building. Borrow for the full year rather than semester by semester, which typically means one inquiry instead of two. And watch rate quote expiration dates, which are usually short.
Our take: start with your school’s financial aid site, which typically links to a lender comparison tool like ELM Select or FastChoice. Treat it as a starting point. The lenders listed first are not necessarily the best fit for your credit profile, cosigner situation or preferred repayment option, and a listed rate is not your rate until you get an actual quote, which usually uses a soft pull. Remember that there are many factors that go into calculating your rate with each lender, and there’s no guarantee that the lowest listed rate will be the rate you receive.
Can my student refinance after graduation?
Yes, and it is one of the more consequential financial decisions of the first few years out. Refinancing replaces existing loans with a new private loan, ideally at a lower rate. It can combine federal and private loans together, or refinance private loans only.
The tradeoff for federal loans is permanent. Refinancing federal loans into a private loan gives up income-driven repayment, federal deferment and forbearance, and eligibility for any current or future federal forgiveness program. There is no path back.
Our take: worth exploring 6 to 12 months after graduation, once income and credit are established. A graduate with stable income and mostly private loans is often a good candidate. A graduate in public service, or anyone who values the income-driven repayment safety net, should think hard before refinancing federal loans away.
Private Student Loan Options from Citizens
Citizens offers two private student loan products: the Citizens Student Loan for undergrad and graduate students, which makes the student the primary borrower, and the Citizens Student Loan for Parents, which makes a parent or sponsor the primary borrower. According to Citizens, both offer fixed and variable rates; no application, origination, or disbursement fees; and no prepayment penalty.
With both options, you could be eligible for Multi-Year Approval†, which could eliminate the annual reapplication and hard credit check discussed above. Citizens also offers a 0.25 percentage point Loyalty Discount† for students or cosigners with an eligible Citizens account, and a 0.25 percentage point discount for Automatic Payments†.
Rates, terms, and discounts are subject to credit qualification and other eligibility criteria. See ciitzensbank.com for current terms and full eligibility requirements.
“When choosing a private student loan, it’s important to consider the whole picture,” says Ann Lague, Senior Vice President of Student Lending Sales for Citizens. “Based on the repayment option you choose, you and your student could have a relationship with this private lender for many years. Consider ways that a lender could support your student throughout college and grow with them as they start their first career.”
The one thing to do before signing anything
Read the promissory note. Not the rate sheet, not the comparison table, not the marketing page. Cosigner release terms, deferment rules, death and disability provisions, and fee structures all live in the note, and they are the terms that determine what the next four years actually look like.
Every answer above is a question you can ask before you sign. The families who ask them are not the ones asking us what happened afterward.