As one of the largest banks in the United States, Bank of America is a well-known name in the financial services industry. Bank of America offers a wide array of financial services through more than 5,000 bank locations throughout the country. One segment of the lending industry that the company no longer participates in is student loans. They stopped offering private Bank of America student loans in 2008 and federal student loans two years later.
Bank of America offers a wide variety of financial services, including checking and savings accounts, auto loans, credit cards, and other types of loans. At one time, Bank of America was among the largest providers of private student loans in the county. Currently, the company has no private or federal student loans on its books and old Bank of America student loans have been sold to other companies, which now service those loans and collect payments from borrowers.
What Were Bank of America Student Loans?
During the years they offered student loans, Bank of America student loans were offered through a variety of programs available to meet the needs of both undergraduate and graduate students. Prior to 2008, they offered a few different certified and non-certified private student loans that helped students cover the cost of higher education. After 2008, the company serviced only federally subsidized student loans.
Private Student Loans from Bank of America
Prior to 2008, Bank of America offered private student loans. These loans were available to students with unmet tuition needs after federal funding was awarded. Depending on the type of loan, the student could use these student loans to cover the gap in tuition and for other education related expenses, such as textbooks and room and board.
Credit history and credit worthiness were evaluated for students to qualify for Bank of America student loans. They offered the option of adding a cosigner to get a higher loan amount or a lower interest rate, and many borrowers took advantage of these incentives.
Private Bank of America student loans were offered in two categories: certified and non-certified loans. Certified loans were certified by the student’s school. These private student loans were guaranteed to cover the remaining amount of money needed to cover the difference between the federal student aid award offered to the student and the actual cost of school. These loans were available for undergraduate and graduate students.
Non-certified loans were private loans that did not need to be certified by the student’s school. These Bank of America student loans were often used by students to cover the cost of room and board, textbooks, and other education related expenses. The Education Maximizer Loan and CampusEdge Student Loan Program were two popular non-certified student loan programs offered by Bank of America prior to 2008.
The bank offered flexible repayment terms with a variety of options to meet the unique financial circumstances of each student. They also offered special programs, such as TERI loans, which were loans guaranteed by The Education Resources Institute (TERI). This is a private student loan and guaranteed by a private organization, not the U.S. Department of Education. People often mistook these private student loans for federally subsidized loans.
Federally Subsidized Loans from Bank of America
When the company made the decision to stop offering private student loans in 2008, they announced that the bank would begin offering federal loans through their CampusOne Student Loans. The federal student loans offered by Bank of America included Stafford, Plus Loans, Graduate Student Plus Loans, federal consolidation loans, and other loans that were available through the Federal Family Education Loan Program (FFELP).
For Bank of America’s Stafford loans, students who filed taxes as an independent student generally received higher borrowing limits than students listed as a dependent student on their parents’ tax returns. Bank of America was a main loan originator in the Stafford loan program and a large number of students chose to have their federal loans dispersed through Bank of America, making it a main servicer of these types of loans during the years they were offered.
Why Does Bank of America no Longer Offer Student Loans?
The decision to stop offering private Bank of America student loans in 2008 was due to the economic crisis that began to grip the country in that year. Financial markets collapsed, large financial institutions stood on the brink of collapse and had to be bailed out by the government, and credit became tight in what became known as the “credit crunch” that accompanied the financial crisis. Bank of America and other lenders made the move away from private loans to federal loans because the student loan market was seen as unprofitable during the credit crunch.
Banks made this decision, in general, because the federal loan programs seemed less risky during a time of economic uncertainty. After they stopped offering private student loans, Bank of America student loans were only offered through federally subsidized student loan programs. They continued to offer these loans to undergraduate and graduate students for the next few years.
In 2010, the company made the decision to stop offering federally backed student loans. At the time of this decision, Bank of America announced that it had decided to move out of the student loan business and shift its assets elsewhere. From 2010 forward, no student loans have been available from this bank, including private and federal loans.
Each time they stopped offering student loans, once the decision was made, they started divesting their student loan portfolios. After selling off their private student loans, Bank of America decided to stop offering any type of loan and sold off its $3.9 billion portfolio of FFELP loans between 2014 and 2017. These loans were sold to other companies and information about the new servicer of each loan was sent to the borrower.
Although the private and federal loans were sold, the debt is still owed to the company that purchased the loans from Bank of America. People with old Bank of America student loans will be required to continue making student loan payments to the new servicer. A variety of refinancing options are available to people with old Bank of America student loans.
This issue is not limited to Bank of America. In fact, most major banks no longer hold student loans on their books. Wells Fargo and Discover are the exceptions, as both institutions continue to offer student loan options. Most major banks got out of the federal student loan business after the federal government replaced FFEL loans with direct loans. This resulted in traditional lenders being unable to profit from federally subsidized student loans, causing them to move on to more profitable ventures, such as credit cards and auto financing.
What Were the Pros and Cons of These Loans?
Decisions about how to fund your education will impact your life for many years, especially if you end up with a significant amount of student loan debt. There are advantages and disadvantages to all types of loans, including federal and private student loans, and these should be considered prior to making borrowing decisions.
Many of the disadvantages of private Bank of America student loans are the same as with student loans from any major bank. This is the reason most schools, lenders, and the federal government recommend minimizing student loans, particularly unsubsidized student loans.
In terms of its student loan offerings, Bank of America student loans were a victim of the 2008 financial crisis. Due to the credit crunch caused by the economic crisis, the company stopped offering their private student loans. When changes were made in the federal loan program that prohibited lenders from making substantial profits from these types of loans, the company made the decision to get out of the student loan business entirely.
Those looking for new student loans often search for information about Bank of America student loans. This is likely due to the fact that it is a major bank and offered private and federal student loans at one point. If you are currently searching for a student loan, many good lenders continue to offer both federally backed student loans and private student loans, so you will be able to find a program that will help you achieve your educational goals. College Funding Informer offers information and resources to help you find scholarships, grants, and loans.
People who had student loans through Bank of America were caught off guard when the bank stopped offering loans and began divesting their existing student loans. Many were confused about their new servicer and how the change would affect their loans. If you have an old Bank of America loan that was sold to another company and you are unhappy with your current loan servicer, there are a variety of student loan refinancing options available.