According to a Bloomberg report, Wells Fargo is looking into offering refinancing on federal student loans.
The company currently only offers private student loans and private student loan consolidation – and federal loans cannot be included in the consolidation. Borrowers who have multiple private student loans through Wells Fargo can combine them into one larger loan.
John Rasmussen, head of personal lending at Wells Fargo, told Bloomberg that the bank hasn’t made a final decision yet. “We’re sizing what that should look like, how we’d do that in a real customer-focused way,” he said.
Wells Fargo’s student loan portfolio currently sits at $11.5 billion, which is down from $12.2 billion a year earlier, Bloomberg reported. Rasmussen says that as the economy has improved, loan payments have picked up considerably. Plus, the bank was hit with a string of consumer scandals that damaged their relationship with many customers.
Federal loans currently represent 90 percent of the student loan market. By limiting its business to private loans, Wells Fargo has access to only about 8 percent of the student loan market.
An analyst told Bloomberg this move makes sense for Wells Fargo and that many qualified borrowers with government-backed loans could save money if they refinanced in the private market.
Still, consumers who want to refinance their federal loans through Wells Fargo might want to do their due diligence and be sure it’s the right choice for them. The bank has been involved in numerous consumer scandals over the past couple of years.
Among the scandals, Wells Fargo admitted its employees opened 3.5 million fake bank accounts and credit cards and enrolled hundreds of thousands of customers in online banking without their approval. The company blamed this on unrealistic cross-selling goals placed upon its sales department. And earlier this month, the bank revealed in an SEC filing that it had mistakenly foreclosed on hundreds of homes over a five-year period.
These scandals have continued to affect the company’s reputation and bottom line. In fact, the Federal Reserve has prohibited that bank from growing past its 2017 earnings until it addresses its “pattern of abuses and lapses.”
Still, more companies have begun offering student loan refinancing. This competition is good for consumers as they can shop around and gain access to lower interest rates and potentially save money on their student loans.
Borrowers who are considering refinancing their federal loans with a private lender should consider all of their options first. This can save them thousands of dollars in interest charges. But borrowers also lose access to income-driven repayment plans and federal loan forgiveness programs.