Chase To Reduce Private Loan Margins For Lowest Cosigned Rate By 1.1%

Here is the email that went out to 4-year schools last week:  Download E-Blast, Chase Select Pricing Update, 4Y, 5-6-09-2

Here is the impact of these changes on Chase's variable-rate private student loans, which adjust quarterly based on the LIBOR index, which will become effective on June 5, 2009:

• Reduces lowest interest rate on cosigned loans ("teaser rate") from 6.07% to 4.97%
• Highest cosigned rate remains at 11.57%
• Reduces Chase's Student-Only Rate from 13.07% to 10.32%

Prior to this change, Chase's "teaser rate" had been the highest among the eight lenders rated by SLA in the Private Student Loan Ratings service.  As noted previously, many more private loans are priced at the higher end of the interest rate range provided by lenders, so this change is likely to have an smaller effect than if they lowered the high end of the interest rate range.  While Chase is dropping their student-only rate by 2.75% from 13.07% to 10.32%, a key question would be as to what the approval rate for this loan is (which has only one tier), as lenders are requiring cosigners on a higher percentage of private loans. 

I also noticed that Chase had updated their website by providing a range of interest rates for private loans on their Current Interest Rate page (I have highlighted the change which was missing when I posted earlier about this): 

• School Certified Private Loans

  Chase Select is a school certified loan product. This means your school must offer this loan product for you to be eligible to receive it and it also requires school certification.

  Variable Interest Rate For Chase Select	Month	Current 3 Mo. LIBOR Index
  3 month LIBOR Index + a margin (from 4.75% to 12.25%)	April 4, 2009 - June 30, 2009	1.32%

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Chase also indicated in the release to the schools that they would be updating their pricing more frequently.  Their pricing changes show how lenders are increasingly developing price lists which segment borrowers by cosigner status and school type(2 year vs. 4 year).  I will be evaluating lender lists in the weeks ahead to see if lenders are also differentiating their pricing at schools of the same type too.