Citi Announces One Of Its 'Bold Steps': Stricter Rules On Student Loans

Two readers have forwarded us a second email sent out by Citibank today, but it’s not another vaguely worded PR blast from the CEO. Instead, this one announces that Citibank is adopting the zero-tolerance approach to late payments favored by the credit card industry—miss a payment due date and you’ll lose any interest rate discount(s) you currently enjoy.

Sean writes,

Just got this email from Citi’s student loan business. Yes, I carry my loans with Citibank, but I consolidated when the interest rate was at rock bottom in spring of 2004. 3% baby!

Looks like if you post your payment one day late, Citibank will terminate any interest-rate deductions you have earned. I guess this is one of the “bold steps” Vikram is taking to shore up profits.

Anyone with loans with Citibank better make damn well sure they pay on time, otherwise it can cost them big time.

Dear Valued Student Loan Customer,
??We are writing to inform you about important changes to the terms of your loan.??To retain your borrower benefits with us, you must make and have your payments posted to your account no later than the scheduled due date. Any payment posted after the due date will result in the termination of such benefit. Interest rate reductions and other benefits do not apply during periods of deferment and/or forbearance and automatically terminate for payments returned for insufficient funds, loan delinquency, default, and/or the purchase of your loan by a guarantor.


Gosh, Citibank, we were kinda hoping your bold steps would be a bit more consumer friendly, you know?

(Thanks to Sean and Eric!)
(Photo: ElvertBarnes)


Edit Your Comment

  1. sponica says:

    Even though this may be the case, I still prefer Citibank to Sallie Mae…and I’m sorry people should be paying their bills on time.

  2. Sounds a bit “pro-consumer”. If “pro-consumer” means paying one’s bills on time.

    To the don’t wanna pay on-time crowd the cost of the loan just got expensive.

  3. azntg says:

    The second bold step is an increase of fees and an increase of possible incidents that will invoke fees.

    C’mon Citi! I know you guys want to do this! I KNOW THEY ARE GOING TO DO THIS!

  4. Kajj says:

    Can anyone recommend a GOOD bank to go to for private student loans?

  5. sponica says:

    @Kajj: Um…citibank was the most liked and financially stable, from the anecdotal evidence I’ve gathered. Avoid Astrive, their checks were bouncing more than Tigger for a while.

  6. celticgina says:

    First National Bank of Mom and Dad?

    Oh Wait, we’re broke from putting gas in the car to get you to college!

  7. ironchef says:

    any excuse to jack up the interest rates sounds very anti-consumer.

    But a permanent loss of your good pre negotiated rate? Geez.

    Sounds like the same tactic those Payday loan scam jobs rely on.

  8. warf0x0r says:

    Well if you took out loans before GHWB uncapped the interestrate they can only go up to 8.25%… it might be 8.5%.

    On top of that the discounts for having automatic payment or a few other things are barely over .5% for most lenders.

    So I guess what I’m trying to say is:
    Ooooohhhh, I’m so scared.

  9. Geekybiker says:

    So if the mail is slow one month even if you mailed the payment a week ahead of time you can lose an interest rate that’ll cost you big $$$ in the long run. I’ve had mail occasionally take weeks to show up. I’d stand behind them if they had a 30 day policy, but 1 day late is draconian.

  10. legwork says:

    I couldn’t help but notice the “make and have your payments posted” requirement. Did the old wording call out the “posted” requirement? The best of them (Providian et al) have already shown a willingness to hang onto payments until late fees and other penalties will apply.

    Some people say banking executives are sleazes. What’s the truth, Fox viewer?

  11. yaced says:

    Seems like they are trying to make up for the increase in defaults.. but I think this is only going to increase them.

  12. howie_in_az says:

    I’m taking a bold step of my own and refusing to do business with Citi.

  13. Letsgohokies says:

    @Geekybiker: I pay my citibank student loan online for this very reason.

    I got the email while I was reading this story.

  14. Trai_Dep says:

    Stuff happens, particularly over the course of a loan that’s extended for decades.
    If Citi wants to do whatever with its own loans, fine. Buyer beware.

    However, these loans are 100% backed by the US gov’t. No risk, all profit. It stinks and it should be blocked. Or (hehe) have the gov’t switch it from being a student- to a general-purpose loan (losing scads of deductions, protections and being exempt from bankruptcy proceedings).

    They want a free market, then let them play in a free market.

  15. SarcasticDwarf says:

    I have to ask this: Why are they able to make such a radical change to your loan agreement without your specific authorization (much like with phone carriers)?

  16. Kajj says:

    @sponica: Well, crap.

  17. seamer says:

    @Geekybiker: THis is where you rely on the date stamp used by the USPS – if its stamped before the due date, they cant really screw you for it. Just a matter of proving the postal date.

    Or you can use an online banking system to pay the loan online rather than snail mail.

  18. Mollyg says:

    Citibank took my loan off of deferral and started to bill me without notifying me. I did not know until I was 45 days late and got a letter from them. I guess that this is part of their bold steps.

  19. BStu says:

    What benefits are they actually giving? That’s the part that confused me. I can get benefits? I didn’t think I got any, so I didn’t get what the threat was about. Is that just deferrals? I don’t see how someone could be late during a deferral, though. Should I be asking for benefits?

  20. shanecrow99 says:

    Yup. I just got the same email today. My loan is in deferment because I am still attending school but the moment I graduate you can bet I will take out a consolidated loan and get out from underneath CitiBank altogether.

  21. Landru says:

    “I’m sorry but people should be paying their bills ontime” Life happens folks and sometimes payments are late. That doesn’t mean you should be penalized for the rest of your life paying those loans off.

  22. htrout13 says:

    Got my letter this morning!

    Of course, it’s a little late for me, as I was ttthhhiiisss close to defaulting and am now on a mandatory payoff plan… Yeah – for the whopping $3,000 I have left on my loans…

    and before the usual face palms… I figured they can’t take my education back, so I focus on paying my mortgage and car… (electric, water, oil, taxes…) But it works…

    I just shake my head… Citi keeps giving me money, and then can’t understand why I’m unable to pay it all back… Go figure.

  23. @Mollyg:SallieMae was always very good about deferrals when I got laid off a couple of times early in this decade. Easy to prove, easy to resume, and plenty of BOLD notice when the payment cycle was due to start up again.

  24. jacksbrokenego says:

    I had about $15K in Citi student Loans back in 2002 – the loans repeatedly came out of deferment while I was still enrolled in school full time. I repeatedly filled out the deferment forms that they would send me. Usually this was fine, not sure why it kept happening though, they were well aware of my graduation date. Eventually it happened again, and despite repeated attempts to fax them the same form that I’d filled out many times before, they kept calling and telling me that they’d never received it and they would mail me another one. (to this day I still have the completed fax copies, with date and time stamps to show when I sent them in) The last time I heard from them was via lawyer – they submitted a claim to their insurance company, who then sued me for the full $15k for defaulting on the loan even then I was still a full time student. After dozens of calls to Citi, their insurance company and the lawyer – no one was willing to concede that there was an error somewhere and that there’s no way I could have defaulted on a loan I wasn’t even supposed to be paying on. Eventually I was able to negotiate a payment plan with the insurance company and have been sending payments to the lawyers for about 6 years now. Only another 7 or 8 to go. I’ve never done business with CitiBank since, and continue to spew venomous hatred about them to anyone who thinks they might.

  25. Aesteval says:

    The thing with loans is that sometimes things happen. In December I
    went to pay my student loan online and must have closed the browser
    before I hit the actual confirmation screen, thereby thinking that I
    had paid when I in fact did not. Completely unintentional, but it was a
    late payment. Fortunately I don’t have the jackasses at Citi owning my
    student loan.

    @seamer: Except banks don’t give a damn when
    you mail it out; they only care about when they receive it. I sent a
    payment into Citi in January in plenty of time for them to receive it
    and yet I was still hit with a late fee because they didn’t receive it
    until after the date. The consumer is not able to be responsible for
    the postal service but they’re still forced to bend over for it. And
    this is for an account that I NEVER even selected Citi for. They bought
    my account from another bank and instituted a policy to charge a 30%+
    interest rate for the balance that was carried over from the previous

  26. Citi must be interested in running up the number of bad loans on its books. Consumer rate increases like this tend to have this effect. How idiotic can banks be!

  27. micasaessucasa says:

    This is a very interesting scheme. Especially since their website states:

    “Reminder: You should plan to make your online payment at least two (2) business days before the due date. This helps ensure the payment is posted by your due date and helps build a positive credit history.”

    Last summer I started grad school and they sent me a letter saying my account was deffered(sp?) for a year (even though I was only going to college during the summer). In October I just happened to check the account online and found out that my account was delinquent. I never received any notice from citibank. My account still states that I am “in repayment”. I so wish I had the money to pay off this loan in full. My stimulus package is going to paying down this debt, sorry Bush.

  28. sponica says:

    @Trai_Dep: Only FEDERAL loans AKA Staffords, Perkins, and Direct Loans are backed by the US Government. Other loans are backed by the private companies. Either way, they both want their money back.

  29. AudreyGadgey says:

    This does not refer to the standard interest rate charged when you received
    the loan. The loss of benefits they mention are the discounts (approx 0.5%)
    you receive for enrolling in automatic payments and paying on time for 60
    consecutive months. This is not a big deal at all, your standard rate will
    not change.

  30. Trai_Dep says:

    @sponica: So non-Federal loans aren’t backed by the government? Live and learn. Thanks!
    Are the fund provided by the gov’t, or are they piped thru Stafford, etc., to private lending institutions?
    And are all student loans barred from being zeroed out by bankruptcy, or just gov’t granted ones?
    I’m fine with private companies doing what they like, so long as there are realistic alternatives to consumers. But not if they receive any favorable interference from the state. Fair is fair…

  31. Concerned_Citizen says:

    I don’t understand loan companies. They will let people run up 100k+ in student loans who are in majors where they are lucky to get 30k starting salaries out of school. You loan that much money to someone who definitely cannot afford a 600 dollar a month payment and you really have no right to complain when the inevitable happens and they can’t make their payments.

  32. rcsfca says:

    Some citibank loans are backed by the government. My citibank student loans are backed by the government. BTW the government beginning in June of 08 will allow you to consolidate your loans directly with them even if you’ve already consolidated your loans. This means that I will be moving my business back to the US government.

  33. Cliff_Donner says:

    He may be short, and for all I know, he may be a she, but I gotta back the truck up to Sarcastic Dwarf‘s question: is it legal for the loan company to unilaterally amend the terms of what’s gotta be a legal contract?

    Anotherwords, any late payment gives the loan company carte blanche to rewrite the loan terms?

    That don’t seem fair.

  34. Y’all can say you’ve NEVER made a mistake on anything ever in your life, but you are full of it. Even angels have library fines.

    People should pay their bills on time. But shit happens. What if your payment hitched a ride with a commercial airline that was unexpectedly delayed, grounded, or re-directed?

    Repeat offenders should be subject to this new policy, not one-time offenders.

  35. AnonyLawyer says:

    The real issue here is whether the value of the degree you’re purchasing is equal to the amount you’re borrowing from Citibank, plus interest, over the life of your career and the loan. The price of higher education is severely inflated and people are indoctrinated to believe the only way they’ll get ahead is with a degree from a University-Factory. I’m not saying you won’t find it easier to get a desk job in whatever field your degree is in with that degree, I’m saying pick up a trade, work hard, self-teach, start from the bottom, debt free. The only way I am able to make the money I do is because I went into mortgage-type debt to fund my education. Was it worth it? No. I have to work more than most people to keep my job in order to pay back my loans. Would I have a better quality of life if I had gone to hairdressing school and taken out a very small loan to fund that? Probably. There are a hundred people in line to take my job if I f-up or don’t meet my minimum billables. Thousands graduate with law degrees each year with only a handful of jobs available to them. Thousands with 100k plus in debt owing their lives to Citibank, et al. Personally, I think a car mechanic or a “heating and air conditioning guy” are exponentially more valuable in our employment society than another marketer or lawyer.

  36. Optimistic Prime says:

    @AnonyLawyer: You sir, or mam, are awesome. I’ve been telling this to the kids I know for quite some time. I screwed up and listened to everyone who said you must have an education from an expensive university. If I was smart I would’ve learned to weld or something more satisfying… Oh well, lesson learned for me…

  37. @ceejeemcbeegee (AKA!): I wholeheartedly agree. There’s always the one time you forget to make a payment on something, and in this day-and-age, that can be deadly. It only took one missed payment for my credit card interest rates to start skyrocketing and putting me on a very dark road. And I’ll because I forgot to mail it. I do everything I can on-line now, to avoid the problems, but I’m still working hard to avoid missing deadlines.

  38. DeafChick says:

    I do not understand what this means. Yes, I have loans from Citibank and currently they are on Forbearance as I’m not making enough.

    What benefits are they talking about here? I locked in my rate back in 2005. If I made a late payment, I will no longer have that rate?

  39. gqcarrick says:

    Yea good plan citibank, stick it to poor college students who are struggling to pay off student loan debt, thats an AMAZING idea!

  40. gqcarrick says:

    @DeafChick: no deafchick, they are talking about some of the rates you get if you pay on time. For example, a lot of loan companies will give you a lower rate 1% if you pay on time for 6 months. Well if you get that rate and in month 10 something happens and you are a date late your interest rate will go back to what it originally was.

  41. NoWin says:


    I may be off-base, but my guess is that although it is a contract (in the legal sense), it is a bit of a variation, as you do not “purchase” (i.e. a car/house/horse/service), but an “contractual agreement to repay”.

    The contractual terms (probably) have the rider in it for rate adjustments within a range of criteria determined from the lender.

    My last student loan was paid off back in 1982, so I cant say what is in today’s paperwork.

  42. EdnaWolf says:

    I believe this is what they are talking about:

    For Private Consolidation Loans, the interest rate and fees charged
    are based on the applicants’ credit score. Interest rate reductions of
    up to 0.75% include a 0.50% interest rate reduction when the first 48
    consecutive monthly payments are posted to your account by the due
    date and a 0.25% interest rate reduction when a borrower enrolls in
    Citibank’s automated debit payment program, and agrees to only receive
    electronic statements. Co-signers may be released from a loan if the
    borrower has made the first 36 consecutive monthly payments by the due
    date, is creditworthy and is a U.S. citizen or permanent resident at
    the time the release is requested. To retain the borrower benefits,
    you must make and have your payments posted to your account no later
    than the scheduled due date. Any payment posted after the due date
    will result in the termination of such benefit. Interest rate
    reductions and other benefits terminate upon loan delinquency or
    default. Additional documentation and data verification may be
    requested for final loan approval. We reserve the right to modify or
    discontinue benefit programs at any time without notice. Any
    termination or modification of the program will not affect terms of
    loans previously made.

  43. dmartinez says:

    I would immediately call them and inform them that you refuse the new terms of the loan. Student loans are not credit cards and CANNOT have the terms changed on them withought approval from both parties. If you deny the new terms there is NOTHING they can do about it.

  44. NerdRunner says:

    Here’s the thing about this: I have a student loan with Citi and for the most part everything has been OK. There have been two months, though where I have been “late”. I put late in quotes because Citi took the money out of my checking account, but didn’t post it to my loan account until the next day; the day after the due date. That’s right, it posted to my checking account the day it was due, but they claimed that since it didn’t post to my loan account (even though they had the money), it was late. This was before this new policy, so I didn’t lose my interest rate reductions, but I’m scared of the crap that they will put me through if they do it again in the future. Heck – there’s nothing that can really stop them from building in a two or three day “processing” time before posting anything to accounts, just to pull in more interest. (Ok, I’ll admit that’s a bit of a conspiracy theory, but still).

  45. NerdRunner says:


    They aren’t changing the terms, they’re just not going to give you any leeway like they have in the past.

  46. Woah, the reply button rotated.

    And of course they do this the month I’ve mislaid my payment coupon and can’t find it no matter how frequently I ransack the house for it.

    @Geekybiker: To be fair to Citibank Student Loans, they are far and away the EARLIEST of all my senders. My statement generally shows up three full weeks before it’s due. It’s the one bill I have NEVER had come late because of my abominably slow mail (and my last mailperson, who couldn’t really be bothered to deliver the mail).

    @Trai_Dep: “Commercial” student loans are not backed by the government and they’re typically variable-rate. (They also don’t “consolidate” with your federal loans — they consolidate separately into their own variable-rate package.)

    @Concerned_Citizen: “They will let people run up 100k+ in student loans who are in majors where they are lucky to get 30k starting salaries out of school.”

    The system is antiquated; it grew up in the 70s when loans were typically bridges to cover small gaps between grants, which were a much larger portion of student aid and typically came close to covering the full bill, and the total due. Many people graduated from private schools with just a couple thousand in student loan debt. Student loans are still considered good risk, but in the meanwhile grants have fallen dramatically, cost of school has risen dramatically, and loans have become a way of covering the TOTAL cost, while the overall system hasn’t markedly changed. They still run it the way they did in the 70s when the average student loan was tiny.

    @AnonyLawyer: “Personally, I think a car mechanic or a “heating and air conditioning guy” are exponentially more valuable in our employment society than another marketer or lawyer.”

    I feel your pain, and just last month we got our law school student loans less than our mortgage for the first time, but how many mechanics and HVAC guys do you know? I teach ethics to some voctech kids (and one of my best friends owns an HVAC company); HVAC guys are laid off every year and picked up again when the season picks up — but it’s seasonal employment, and there’s no guarantee you get your job back. And there are hundreds of HVAC guys in line to take your job. Mechanics it isn’t quite as bad, but it’s still a competitive field. These jobs don’t pay well. Lots of them working full time have onerous mortgage debt to own a modest home in a non-inflated market. Some of them are on food stamps during the off-season. Some of them can’t afford to have kids.

    There are intangible benefits to being white collar that I think many white-collar workers don’t realize or forget. You generally manage your own work flow. You generally can call in sick and NOT HAVE TO GET A NOTE FROM YOUR DOCTOR. Yes, some of these guys have to get doctors’ notes if they miss a day of work. You don’t have someone literally staring down your neck all day. You have a certain amount of job security. You probably get vacation days, family medical leave, etc. And you probably don’t get your rights violated all that often (though God knows law firms are frequently rotten about obeying the law).

    And as for starting at the bottom — most trades now require an associate’s degree anyway (or an apprenticeship program LONGER THAN COLLEGE — IBEW’s is 5 years), and my classes are full of guys who have hit a ceiling in their 30s and are now back at school working towards a BA because companies won’t promote CNC operators or welders or whatever above a certain level without it.

    I appreciate your bitterness towards law school, and I agree it’s rotten (any system other than a mental institution where 3/4 of the inmates suffer from clinical depression is obviously rotten), and the financial burdens are warping the practice of law and destroying people’s lives. But there are problems all the way through the system, and the grass isn’t necessarily greener elsewhere. At least our handcuffs are golden; other people are similarly shackled but not so lucky.

  47. AnonyLawyer says:

    @Eyebrows McGee: I hear you on all fronts. The grass always looks greener, but that’s usually b/c it’s raining more on the other side.

  48. @Optimistic Prime: If you welded, they’d send you back to college in your mid-30s when you had a spouse and kids and T-ball games to go to and made you sit in my ethics class while you thought about how you had 8 million better places to be and for as much time and money as you were putting into this collegiate endeavor, they were going to bump you up $2 to $5 on the payscale when it was all over, but your other option was to stick where you were for the rest of your life. It sucks.

  49. @AnonyLawyer: What I would do, if I did it over, is go to a friggin’ state school on the cheap, drink more, and pay the loans (if any) off in a couple of years. Oh well.

  50. gqcarrick says:

    @Eyebrows McGee: lol absolutely what I was thinking when I started paying off my private school loans!

  51. muffingal says:

    I agree with IronChef.

    Outside of that, I found that Citibank was quick to threaten your credit report when I had my student loans with them. I have never been threaten by a one day late pay with Sallie Mae which is why I chose to consolidate with them a few years back.

  52. mrearly2 says:

    There’s the typical bank for you–based on fraud and greedy as hell–all of them, actually.
    “We’ll help you get INTO debt…”
    Technically speaking, you are owned by your creditor. And you own nothing, as long as you’re in debt.

  53. EltonDampyre says:

    Unfortunately this isn’t a new policy and it is used by most you heard me
    most student lenders in the industry. Most of them put it in their fine
    print at least Citibank had the decency to tell their customers. I USED to
    own a student loan company and this has always been the practice. Thank your
    Congress men and woman for it. Since the College Cost Reduction Act passed
    on Oct. 1 lenders have continued to originate loans although it is a
    NEGATIVE proposition. As you may have noticed I used the term USED to in the
    description of my affiliation with the student loan industry. Like hundreds
    of other lenders we had no choice but to close our doors after 6 years
    because we couldn’t continue to originate loans at a loss. Be thankful that
    you have an interest rate reduction, NO LENDERS are currently offering one.
    In fact now most lenders will make you pay the origination fee as well. Put
    the check in the mail a week early or pay online.

    Federal Student

    Carlos A. Lopez
    Vice President of Operations EduCare Financial, Inc.
    2300 Tall Pines Drive Ste. 123

    Largo, FL 33771
    fax: 727-599-2099