Sallie Mae promotes responsible borrowing with new ’Smart Option Student Loan’
New private loan helps customers pay off faster, save money
RESTON, Va.—Sallie Mae, the nation’s leading saving- and paying-for-college company, today announced a new private loan that enables students to save money, build good credit, and repay their student loan debt faster. With the new Smart Option Student Loan, a typical customer would pay off the balance nine years sooner and would save an estimated 40 percent of the total amount paid, including principal and interest, compared to most other private student loan alternatives.
Students may apply for the Smart Option Student Loan beginning today. Under the new program, customers will make interest-only payments while in school, so students avoid negative amortization and graduate with substantially less student loan debt. A freshman borrowing the average loan size of $7,700 would cut the payment time in half and save approximately $8,700, compared to most other private student loan alternatives.
Sallie Mae recommends private student loans for families who have exhausted their eligibility for free or less-expensive funds such as scholarships, grants and federal student loans. The company continues to offer federal student loans, which allow students to defer interest payments while in school, to every eligible student at every school in the United States through the 2009-2010 academic year. Terms of previously disbursed private loans remain unchanged.
“Today’s students are financially savvy and looking for affordable, responsible options to help with their investment in higher education,” said Jack Hewes, senior executive vice president and chief lending officer, Sallie Mae. “We have tried to design this loan to be sensitive to the needs of students who not only rely on this financing to get to college, but also want a more manageable level of debt as they transition from school to work. Paying a little while in school guarantees that students will save a lot later.”
Sallie Mae’s Smart Option Student Loan encourages responsible borrowing by functioning like other monthly obligations, such as cell phones and cable TV. The interest-only monthly payments required while in school, coupled with regular financial literacy communications, will help students develop good repayment habits, improve their credit scores, and help make loan payments after graduation more manageable. Reactions from college financial aid officers were favorable and confirmed the need to help students borrow responsibly.
The Smart Option Student Loan’s repayment term will range between five and 15 years, depending on the student’s cumulative Sallie Mae-serviced private student loan balance and academic grade level. Interest rates will be variable based on LIBOR. Those who apply for a Smart Option Student Loan with a creditworthy cosigner will increase the probability of approval and a lower interest rate. Interest rate reductions may also be available for customers who elect to make payments via automatic debit and receive communications via email. To prevent students from borrowing more than their budgets can handle, the approval process will include a review of monthly income and other debt payments.
Students and families considering a Smart Option Student Loan are encouraged to use Sallie Mae’s Education Investment Planner to estimate the total cost of a college degree, build a comprehensive plan to pay for college, and estimate the salary a graduate would need to keep repayment of student loans manageable. Visit www.SallieMae.com/plan for more information.
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