CitiAssist to provide loans with lower rates

As the dust surrounding Penn's revenue sharing agreement with Citibank settles, students seem to be ultimately coming out on top.

In addition to the $1.6 million that the University will redistribute to affected students, Citibank has also agreed to offer lower interest rates to students permanently with Penn CitiAssist loans.

Ninety-five percent of students who are eligible for CitiAssist loans will receive a rate below prime, according to a Citibank official.

These lowered rates follow Penn's voluntary settlement last week with New York Attorney General Andrew Cuomo, in which it agreed to end its two-year revenue-sharing deal with Citibank.

In this deal, the University received a 2-percent fee from the bank for each Penn CitiAssist loan that a student borrowed.

After instructing Citibank to no longer provide this payment for the second half of this academic year, Frank Claus, the associate vice president for finance, asked Citibank for something more.

"In the second part of the year, we told Citibank not to give us any more money, so we aren't able to refund the second half," Claus said. "That's why we have to ask Citibank to reduce their interest rates."

The new Penn CitiAssist interest rates will be awarded according to the quality of the borrower's credit - Fair, Good, Excellent or Superior.

Fair credit will receive a rate of prime plus 1 percent; Good credit will receive the prime rate; Excellent credit will get prime minus one-half percent; and Superior credit will receive prime minus 1 percent.

The prime interest rate is only offered to Citibank's best customers, Claus said.

College freshman Kevin Taylor, who borrowed from Penn CitiAssist this year, said the lowered rates were an unexpected surprise.

"Getting money back is great, and, also, the lower interest rate is a surprise," Taylor said. "It's a good move by Citibank."

He added that, with rates below prime for Penn students, Citibank will probably attract more customers, despite recent controversy.

Claus is currently trying to make these new rates retroactive to Jan 1. Citibank has not yet confirmed this, but Claus said that "there is no alternative."

In addition to lower interest rates, the University's $1.6 million redistribution is well underway.

This money will be credited to student accounts and then immediately issued as a refund for the same amount.

"We are in the process of reconciling the amount due to each student with Citibank to make sure that their numbers agree with ours," Claus said. The data will then be posted on Penn InTouch in the next few days so students can see if they are entitled to a refund.

And that $1.6 million won't make a dent in current financial aid, said Executive Vice President Craig Carnaroli.

"We've had really strong success in fundraising for financial aid, and those funds will continue to grow," Carnaroli said, referencing a 48-percent growth in the undergraduate endowment. "I think schools will just have to adjust their resources to keep their commitments."

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