If you’re in the market for private student loans you’ll likely consider getting a Sallie Mae loan. Sallie Mae no longer services federal loans. Instead, it originates and services private student loans. Its spin-off company, Navient, has taken over the servicing of federal loans. While you’ll get better interest rates from federal loans, if you do need private Sallie Mae loans, here’s what you should know.
A financial advisor can help you create a financial plan that accounts for your college loans.
Sallie Mae Student Loans
The cost of college has risen so steeply that the average college graduate will pay thousands of dollars in lifetime costs for a student loan. The lucky ones will have federal student loans, which come with fixed interest rates that are capped by Congress. Federal student loans also offer more flexibility in the form of income-based repayment plans.
Sallie Mae now only offers private loans. It’s a publicly traded corporation accountable to shareholders, so it makes sense that it would be in the profitable private student loan game. The Sallie Mae student loan interest rate you’re eligible for will depend on your credit score.
Private student loans from Sallie Mae are marketed as loans that help students bridge the gap between the funding they’ve secured and the cost of their college tuition. In the past, Sallie Mae offered what was called the Sallie Mae Signature Student Loan. The Signature loan was open to higher-risk borrowers. It no longer exists. These days, if you want a private student loan from Sallie Mae you’ll need to prove your credit-worthiness and/or the credit-worthiness of your parents.
Sallie Mae’s Smart Option Student Loan
Sallie Mae replaced the Signature Student Loan with what’s called the Smart Option Student Loan. It’s now harder to get a Sallie Mae loan if you come from a bad credit background, either due to your own credit or the credit of co-signers such as your parents. The Sallie Mae Smart Option Student Loan comes in three forms. Each one has a different repayment option as described below:
- First, there’s the deferred repayment option. This lets you avoid repaying your loans until after you’ve graduated.
- Second, there’s the fixed repayment option. Fixed repayment means you pay a small, fixed amount while you’re in school. Sallie Mae says you can shave around 10% off your loans by committing to begin paying as soon as you start school, through fixed repayment.
- Third, there’s the interest repayment option. You pay more while in school because you begin paying interest right away. According to Sallie Mae, choosing the interest repayment option can save you around 20% of your loan cost compared to the deferred repayment option.
If you read Sallie Mae student loan reviews, you may be daunted. Some borrowers have found it difficult to navigate the loan bureaucracy. Indeed, Sallie Mae recently settled complaints that it took advantage of servicemembers with student loans by unlawfully charging them fees and high interest rates. In the end, the company paid over $90 million in restitution and penalties.
On the plus side, Sallie Mae Smart Option Student Loans don’t come with prepayment penalties. And if you set up automatic debit from your bank account to make your loan payments Sallie Mae might shave 0.25% off your interest rate.
Still, because private student loans can come with variable interest rates that can reach the double digits, they should always be approached with caution. Ideally, you would finance your college education without having to take out private loans.
Navient Student Loans
Folks who took out federal student loans used to deal with Sallie Mae as their loan servicer. Now, they’ll deal with Navient. It’s a publicly traded company based in Delaware that says its mission is to help borrowers navigate the student loan process.
If you’re getting mail from Navient, you’ll want to open it and deal with it promptly. If you have questions or need help, pick up the phone and call Navient. Ignoring your student loans or missing payments mean you could pay more in interest down the road.
Sallie Mae’s role in the student loan world has changed significantly. It no longer services federal student loans, concentrating instead on originating and servicing over a million private student loans. In other words, having a Sallie Mae student loan doesn’t mean what it used to.
Any time you’re shopping for a private student loan you should look for a low, fixed interest rate. In a low-interest rate environment, taking out a variable-rate loan is more of a gamble because your rates are almost sure to rise. Borrowing money is always a risk, but there are steps you can take to protect yourself from loans you won’t be able to pay back. The sooner you begin making interest payments the less money you’ll pay over the lifetime of the loan.
Financing Tips for College
- Consider working with a financial advisor to account for your student loan debt in your financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s student loan calculator to get an estimate of your monthly payments and student loan amortization over time.
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