If you think you have run out of options to acquire student loans, Sallie Mae loan might be an option for you. It is a private corporation that provides students with the loans to fund their education. However, before applying for Sallie Mae student loans, have a thorough check on whether you really have taken all the Federal Loans you were eligible for. Fill out a FAFSA form and see what its result shows before going towards the private loans category.
Sallie Mae started off as a Federal Loan lender in 1973 as part of the federally guaranteed student loan program. In 2004, it separated from the Federal Government and established itself as a private company. Still, for a short time, it serviced as a lender to federally issued loans. In 2014, it got separated from Navient which is now a federal lender. Sallie Mae student loan provider now focuses on lending private loans to undergraduate and graduate students, and also the parents.
A Glance at Sallie Mae Student Loans:
- For fixed interest rates: 5.74% to 12.87% APR. For variable interest rates: 3.37% to 12.74% APR.
- Grant of a grace period of six months, five to fifteen-year terms.
- Options like deferment and forbearance are available.
In 2015, the company’s annual report showed that the average interest rate for Sallie Mae student loans was 7.93%. Like many private loan lenders, Sallie Mae grants you a loan deferment if you go back to school at least part-time. Deferment of payments means the reduction in your payments. If you request a deferment in Sallie Mae student loans programs, you won’t have to make principal and interest payments when you are in school or doing an internship. The loan also offers forbearance in three-month increments for up to 12 months. Forbearance means temporarily postponing your loan payments. It can help you avoid a default in case of financial difficulty.
However, when your loan is in deferment or forbearance, more interest will incur. When your loan goes back to payment, this interest will add to your balance. But if you make any extra interest payments when you are in deferment period, it will lower your owed amount.
Do You Qualify:
You can check online if you qualify for the Sallie Mae student loans. The credit score range is 640 to 748 for an average borrower. If you don’t have the required credit score, apply for the loan through a cosigner. According to the company’s 2016 presentation, out of all the students who apply for this loan, 40% get approved. And out of those approved, 90% have a cosigner.
Sallie Mae student loans offer leniency to students in repayment of loans. They offer a six month grace period after graduation in which their modified loan repayment options are valid.
- You can ask for a complete deferment while in school or can pay as much you like or can.
- You can reduce your interest by paying only $25K when you are enrolled in school.
- You can pay interest collected while in school and through grace period.
In all three options, interest will incur if you choose to repay the loan later on. This interest will be capitalized if you pay the loan after the grace period.
Advantages of Sallie Mae:
If federal student loans are no longer an option for you, you can always opt for private loans to fund your education. Following are some of the reasons as to why you should opt for Sallie Mae student loan:
Leniency in Repayment:
The company provides you with the option of ‘graduated repayment’ which differs from the ones offered by federal loans. In this option, you get a choice of making interest-only payments for 12 months after the grace period instead of paying interest and the principal. This could be a good start for the students who have just graduated and don’t want to be crippled with debts at the start of their career. It offers them to make themselves financially strong first. However, keep in mind that the total amount of loan will increase and the repayment time will prolong if you opt for this method.
Co-signer Release After 12 Months:
If your co-signer doesn’t want to remain on board with your loan, Sallie Mae student loan gives you an option of releasing him after 12 months. In order to do that, you will have to get graduated first, make timely payments for 12 months, and have strong credit points. Some other private lenders also offer the option of co-signer release. But the requirement is to make on-time payments for at least 24 or 36 months and in some cases, 48 months.
The limitations for this convenience are that your loan can’t have deferment or forbearance. Moreover, you can’t have been in Sallie Mae’s graduated repayment plan.
Unique Loan Offerings:
Sallie Mae student loans are not bound to the undergraduates, graduates, and parents only. It also provides loans for many education-related expenses which other loans don’t cover. You can borrow money for a career training program, the bar exam, medical and dental residency costs, or to pay for your child’s private elementary, middle or high school.
Keep in mind that the loans for these purposes have variable interest rates, and these may change with the change in economy.
Shortcomings of Sallie Mae Student Loans:
Higher Parent Loan Rates:
Sallie Mae launched their parent loans in April 2016 which provides loans to the family of the students. However, they have high-interest rates for the loans parents, spouses, guardians, or other family members take on behalf of the students.
Annual Percentage Rates APR for undergraduate students is from 2.5% to 9.59% for variable APR and 5.74% to 11.89% for fixed rate APR. For graduate students 2.5% to 7.51% for variable and 5.74% to 8.56% for fixed rate APR. the loans which the family members take have 4.0% to 10.37% variable rate and 5.74% to 12.87% for fixed rate APR.
You could get a federal parent PLUS loan if you had enough credit for the school year 2016-17. It had a fixed interest rate of 6.31% plus an origination fee of 4%. Some other private lenders have lower interest rates than Sallie Mae. For example, SoFi prices its loans at 2.9% to 6.07% APR for variable rates and 4.25% to 7.75% APR for fixed rates.
Lesser Protection Than Federal Student Loans:
The main priority of most students when in need of loans is federal loans because they offer more borrower protection. Private students loans are often more expensive. Although Sallie Mae has a graduated repayment option, it’s only valid till the end of one year after graduation. With federal loans, you can limit your repayments according to your income. This allows you to cap your repayments at 10% to 20% of your income.
If you want to take private loans, always get full information before applying. Also, get information of different types of lenders to see which loan suits you the best. If you’re opting for Sallie Mae student loans, you can apply directly on their website.