Citi Loan Program Ends Nationwide

Graduate students at Harvard are not alone in facing rising interest rates on their student loans after Citigroup, the struggling financial services giant, cancelled a program designed to make it easier for international students to receive loans.

Citibank, the consumer and corporate banking arm of Citigroup, terminated its custom loan program with international graduate students at Harvard earlier this month, according to University officials. The bank is also canceling similar agreements with international students at schools including MIT and the University of Michigan, financial aid officers at those schools said.

The Assist custom loan program allowed foreign students to take out student loans without a cosigner—something that most lenders require of all students.

Citibank will honor all CitiAssist loans that were processed before the programs’ termination and will continue to underwrite loans for students in coming years, but no longer under the terms of the special arrangements with the affected schools.

Citigroup spokesman Mark Rodgers declined to say how many schools will be affected by the change, calling the specific arrangements with institutions confidential.

Rodgers said frozen credit markets have forced lenders to raise standards of creditworthiness. International students typically have a higher probability of defaulting on their loans than American students.

“International students who do not have a U.S. cosigner and do not have an acceptable credit rating in the U.S. are not likely to get private CitiAssist loans,” Rodgers said.

Harvard’s arrangement with Citibank was discontinued Oct. 6. International students at all 10 graduate schools have been affected by the change.

University financial aid officers have been discussing options to ensure that all students affected by the change will continue to have access to need-based loans in the coming years.

The Harvard School of Public Health’s director of student financial services, Kathryn L. Austin, echoed many administrators’ concerns, saying that the change will make it very difficult for international students to borrow enough money to cover the cost of attendance.

“The potential is there that some students may not choose to enroll in the future,” Austin said last week.

In 2003, then-University President Lawrence H. Summers inked the deal with Citibank to provide loans for the University’s graduate students, with both institutions sharing the financial risk. Three years later, given the exceptionally low default rate on the program, Citibank agreed to underwrite all financial responsibility for the loans.

Laurie A. Hogan, the University’s financial aid liaison officer, said that she expects loan terms and interest rates for all graduate students taking out CitiAssist loans to change. Citibank will base decisions on an individual’s credit profile, Hogan said.

“Fortunately, for many of our professional students who do rely on borrowing,” Hogan said, “the federal system, through Direct Lending and the Stafford and Grad PLUS loans, can fully meet their needs.”

MIT and Michigan have notified their students via e-mail that Citibank announced its intentions to cancel the custom student loan programs, effective Nov. 2, citing current market conditions.

Diane Hunt, the assistant director of financial aid at Michigan’s Ross School of Business, wrote to students that the school is looking for other lending options but that “given the current economic situation, it may be extremely difficult to secure a guaranteed loan program (no credit check, no cosigner) for graduate students.”

—Staff writer June Q. Wu can be reached at junewu@fas.harvard.edu.