I never had to worry about student loans but it’s one thing that concerns a lot of families every year. The rule of thumb that I’m familiar with is that you should exhaust your federal student aid resources first before thinking of going with private student loans. There are many reasons for this, including these facts:
1. Federal loans are fixed rate. While private loans may enjoy lower rates during low interest rate cycles, the fact is that there’s always a risk of rate level changes, and the possibility that rates jump up at some point, making payments less affordable or comfortable.
2. Federal loans are also more flexible, such that you can get away with delays in payment much more easily than with other types of loans.
3. Loans through financial aid are available based on your financial status, and not necessarily tied to your credit rating, making them available to even those with insufficient credit. On the other hand, private loans will require a co-signer if you have less than perfect credit.
4. Terms for private loans are much more stringent and may be less forgiving if you chance upon unexpected problems or issues that may occur down the road (such as disability, death or any other disruption of your payment schedule due to unforeseen circumstances).
But if you’re still contemplating getting a private loan, then there are a few avenues you can take. Certainly, you can hit your local bank, especially if you’ve previously gone to them for auto loans or your mortgage, and feel comfortable with how they conduct business. You may be tempted to stop there again for a student loan. However, one other avenue is to seek options from an experienced student loan lender geared to serving the needs of a college-bound borrower. A lender that has a more specialized focus may have its benefits. Let’s get to know one of the most popular student loan providers, which incidentally, also offers savings products. I still recommend saving via a 529 savings account as the way to afford a college education, but that’s another story altogether.
Introducing Sallie Mae, Student Loan Lender
Sallie Mae is old and trusted. It has gone through a few changes in its history. Over the years, Sallie Mae has enabled college students across the country to finance their education. Back in the 70s, this institution started out as the government-backed Student Loan Marketing Association (SLMA). In contrast to fellow former government-sponsored enterprise (GSE) Fannie Mae, which focuses on the housing market, its focus was on student loans. It still originates, collects, and services student loans for students across the nation.
Although the SLM Corporation (as it’s formally known) was fully privatized by 2004, it‘s still one of the top sources of federally insured student loans in this country. And since it is a private sector company now, it has a board of directors and is no longer associated with the government (in terms of loan origination). Sallie Mae handles many billions in education loans and has tens of millions of customers. It’s also listed on the Fortune 500. While the corporation is based on the East Coast, the bank is chartered in Utah.
An Assortment of Loans For Different Students
Just as there is a range of students and degrees, there are a variety of student loans. When I poured through all the options, my head was spinning. As a parent, I don’t intend to finance my children’s education, as we are taking the “529 college savings fund” road to college. However, as a student of personal finance, I’m quite interested about learning more about the world of school education financing. This kind of thing only seems to exist in countries like the U.S. as the educational systems in other countries are entirely different.
Back to Sallie Mae: you can expect it to have the financial support that students are looking for, whether they are seeking a four-year degree, prefer a trade school or decide to seek help with expenses for medical school. Here’s a quick look at some of Sallie Mae’s loan offerings:
1. Smart Option Student Loan
If you go to the SallieMae.com website, you’ll find them primarily promoting the Smart Option Student Loan, which is aimed at borrowers attending colleges and universities, as well as community college students or U.S. students studying abroad at qualifying institutions. This loan lets students obtain up to 100% of their educational costs. It also has three repayment options and a tuition insurance benefit. There aren’t any loan origination fees for this type of loan.
Check out this overview of how Sallie Mae’s Smart Option Student Loan compares to loans from some other favorite lenders:
|Sallie Mae||Smart Option Student Loan||Low rates, 3 Repayment Options, No Origination Fee|
|Citi Student Loans||CitiAssist Loan for Undergraduate Students||Private Loan; Principal payments deferred while in school.|
|Dept. of Education||Direct Loan||3.40% fixed rate; Several Repayment Plans are available.|
|Chase||Chase Select Private Student Loan||Private Loan; In-School Deferment Available; No Origination Fee|
2. Career Training Smart Option Student Loan
Financing is available for students at trade or technical schools, too. This loan can assist these types of students. Online courses and other types of continuing education can be covered by this student loan as well.
3. Bar Study Loan
Law and medical students can face pretty daunting expenses. However, these students can turn to a few resources. For law students, the Bar Study Loan helps them pay necessary fees and take the courses they need to pass the bar. Medical students have options like medical loans, dental loans and global health loans. These options can assist them with relocation and other costs that residency often entails.
4. K-12 Family Education Loan and Tutorial Financing Loan
College tuition isn’t the only kind of educational expense. If a child attends a private primary, middle or high school, the family can apply for the K-12 loan. For many students, the assistance of a tutoring or learning center is essential. The Tutorial Financing Loan can help cover this expense.
Beyond Student Loans, There Are Also Traditional Banking Products
In addition to student loans, Sallie Mae also has additional financial services and offers other banking products. These include credit cards, savings accounts and 529 Savings Plans. These services are handled by its subsidiary, the Sallie Mae Bank. Like many other institutions, it is a member of the FDIC. And as you’d expect, under FDIC coverage, Sallie Mae Bank’s depositors can benefit from up to $250,000 in insurance.
One other curious fact about Sallie Mae is that it’s also a provider of financial services for universities and governments. It supports billions in ecommerce transactions at almost 1,000 universities and colleges.
The cost of higher education is a major expense for many students and their parents so a lot of them turn to Sallie Mae and its student loan services for educational financing. It could be something to look into, especially if you’re more comfortable about dealing with a highly experienced financial provider that can help you with the specialized needs of the student loan process.
Sallie Mae’s Tips For Paying For College
Step 1: For anyone who is college bound, see if you qualify for an FAFSA (Free Application For Federal Student Aid) grant or student loan. You can finance a college education by applying for need based scholarships. You can supplement your financial requirements with funds from your SLM online savings account, CDs and 529 savings accounts, or other investments.
Step 2: Look into federal student loans.
Step 3: Address any gaps with a pay-interest-as-you-go private education loan such as those offered by Sallie Mae.
Created May 18, 2010. Updated August 24, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.