RBS Citizens Financial Group is expanding its private student loans business across the contiguous United States, the company announced on Tuesday.
The bank previously limited its lending to students attending schools in areas where Citizens Bank and Charter One Bank branches were located. Now students attending school across the lower 48 states will be able to apply for loans at the two banks.
"One of the big issues we ran into was the mobility of students," Brendan Coughlin, RBS Citizens' president of education finance, told American Banker in an interview on Tuesday.
For example, Coughlin says that last year a student and a parent came to the bank as the student was deciding between enrolling at the University of Rhode Island and UCLA.
"In the early part of last year, we weren't able to help finance them at UCLA. That's not a great customer experience," he says.
The move comes as major banks like U.S. Bank (USB) and JPMorgan Chase (JPM) are pulling out of the market, while regulators increase their scrutiny of student loans.
Coughlin acknowledges that "the regulatory environment has changed the landscape quite dramatically," adding that the bank "focuses on products and terms that are transparent."
RBS Citizens is also expanding its student lending business at a time when some observers are warning that the overall market could be facing a subprime housing-like bubble, soon to be deflated by soaring defaults.
But the current credit profile in RBS Citizens student lending business "is extraordinarily strong, one of the strongest credit books at the bank," Coughlin says, adding that the bank's Trufit student loan business has seen strong performance since launching in 2009.
The portfolio has grown 50% since last year and is expected to grow at the same rate this year, according to Coughlin. He adds that 90% of the loans are cosigned by parents.
Coughlin says that, for now, the bank primarily lends to existing customers at Citizens or Charter One, but notes that the expanded program could help bring in new consumers along the way.
"Those who aren't customers, we hope to earn their loyalty," he says. "Even if they are a California student, there's a high likelihood they'll end up in New York, Boston, or Philadelphia, and we'd like to start a relationship early to earn their loyalty."