People with federal student loan debt now have a few options to lower their rates with private consolidation loans, but consumer advocates warn they could be giving up vital protections in doing so.
Royal Bank of Scotland Group Plc’s Citizens Financial Group recently expanded its student loan refinancing program to include federal as well as private student loans. The bank joins two much smaller, peer-to-peer lenders, SoFi and CommonBond.
All three lenders say they counsel potential customers about the consumer protections lost when federal debt is refinanced into private loans. Those protections include access to federal income-based repayment and forgiveness programs as well as generous forbearance and deferral options.
“Those are very important rights,” said Persis Yu, staff attorney for the Student Loan Borrowers Assistance site run by the National Consumer Law Center.
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