Programs to Help Lower Student Loan Repayments from Sallie Mae

Experience Adds to Reputation

Sallie Mae is the country’s premier financial services company specializing in the needs of college students and their families. Originally founded in 1972 as a government sponsored agency, Sallie Mae began privatization in 1997. By 2004 the company cut all ties with the Federal government, and today Sallie Mae is a publicly held, private sector financial institution.

Sallie Mae specializes in providing affordable loans for college students at every stage of their development. The company offers a variety of student specific loans, including loans for undergraduate and graduate students, loans for career training, loans for medical and dental residencies, and loans for law students preparing for their bar exams.

Sallie Mae also offers extensive 529 College Savings Plans for students and their families, as well as banking services and student friendly insurance policies for health, auto, home and tuition. In addition to their extensive in-house services, Sallie Mae also acts as administrators for their client’s Federal student loans. College students will find that Sallie Mae can address all of their education related financial needs.

Sallie Mae Student Loan Repayment Options

Like all private lenders, Sallie Mae’s borrowing limits, interest rates and repayment plans are contingent on the borrower’s credit history. For those students holding Federal loans which are being managed through Sallie Mae, borrowing limits and repayment schedules will be set by the government. However, Sallie Mae understands that students often find themselves in difficult financial situations, and college loans can create sizable debt that can easily become unmanageable as graduates slowly move into the workforce. For those students, Sallie Mae offers five loan repayment options designed to address the borrower’s changing financial situation.

• Standard Repayment – This is the default option for all student loans managed through Sallie Mae. Student borrowers are given a set schedule of level monthly payments that cover accruing interest as well as part of the principle.
• Graduated Repayment – This program allows students to opt for lower initial monthly payments, which gradually increase over a ten year period. This is an excellent option for newly graduated students who are just entering the workforce, but expect their income to increase over the next few years. The graduated repayment option can be applied to all Federal Direct Loans, PLUS Loans and Federal Consolidation Loans. Bear in mine that this option will extend the life of the loan, and will result in an increase in accrued interest.
• Extended Repayment – This option is only available to students with an outstanding loan balance in excess of $30,000. Students on the Extended Repayment plan will have the life of their loans extended to 25 years, and will make monthly payments based on a fixed annual or graduated repayment amount. Monthly payments will be no less than $50. Students holding Federal Direct Loans, PLUS Loans and Consolidation Loans are eligible for this repayment plan. Again, extending the life of the loan will mean an increase in the total cost of the loan.
• Income-Based Repayment – This option is available to Federal student loan customers who are experiencing financial difficulties. The program allows borrowers to cap their monthly payments at 15% of their discretionary income. To be eligible for this option, borrowers must provide documentation of their financial hardship. Participants may remain in the program until they have fully discharged their loans, or choose to leave the program. This repayment option is not available to borrowers with Parent PLUS Loans or private loans.
• Income-Sensitive Repayment – This repayment option is available to students with outstanding Federal Direct Loans, PLUS Loans and Federal Consolidated Loans. The program allows borrowers to lower their monthly payments by tailoring the repayment schedule to the borrowers gross monthly income. Payments will be between 4% and 25% of the borrower’s gross monthly income. Again, this program lowers payments while extending the life of the loan. Borrowers who qualify for this option will see their total interest costs increase over the life of the loan.

Federal Consolidation Loans

Federal Consolidation Loans allow borrowers to combine multiple Federal student loans into one more manageable loan, resulting in lower monthly payments. Students considering loan consolidation should understand that the process often extends the overall life of their loans, and will result in an increase in total interest costs.

Up until recently, student-borrowers could apply for a Federal Consolidation Loan through Sallie Mae, but recent changes in the Federal student loan program have shifted the application process back to the Federal government. Students interested in securing a Federal Consolidation Loan must now apply directly to the U.S. Department of Education’s Federal Student Aid Division.

Students who have qualified for a Federal Consolidation Loan may still choose to manage their loan through Sallie Mae, and may be eligible to take advantage of the repayment options discussed above.

Private Student Loan Consolidation

Sallie Mae no longer offers private loan consolidation. The repayment options discussed above have been put in place to address the needs of students wishing to lower their monthly payments, without the necessity for writing new consolidated loans. Students may still choose to consolidate their outstanding loans through another financial institution, in which case their new repayment plan will be governed by their new private lender.

Students considering private loan consolidation should refer to our section on Using Private Lenders to Consolidate Student Loans.

Student Loan Information

Sallie Mae is devoted to helping students navigate the murky waters of college finance. Through their website students can find helpful information on Saving for College, Planning for College, Paying for College and Money Management Before, During and After College. Students will find that Sallie Mae can answer all of their education related financial questions, and can provide them with advice and counseling to help them better manage their financial future.