Monday, July 5, 2010

Sallie Mae Launches New Private Loan In-School Payment Option

(BUSINESS WIRE)--For the price of two pizzas or less than a dollar a day each month, college students can keep their student loan interest in check and ultimately save an estimated 30 percent in interest charges. Now available with a new, $25-per-month, in-school payment plan, Sallie Mae’s Smart Option Student Loan is designed not only to save students money, but also to help them pay off their loans faster. Sallie Mae is the nation’s leading saving, planning and paying for college company.

“To encourage responsible borrowing, we make our most competitive rates available to those who keep up with their interest payments while in school”

For a typical freshman, a simple $25 monthly payment while in school and a shorter repayment period after school can translate into $6,300 of interest savings over the life of the loan, compared to private education loans that capitalize—that is, add to the loan balance—all of the interest that accrues during school. In addition, a typical customer would pay off the loan in 10 years after graduation, instead of the standard 15-year-term offered by other deferred payment private student loans. Additional details are available in this savings example.

“To encourage responsible borrowing, we make our most competitive rates available to those who keep up with their interest payments while in school,” said Joe DePaulo, executive vice president and chief marketing officer, Sallie Mae. “We also recognize that, for some students, the option to pay some interest and defer the rest fits their budget now and saves them lots of money in the long run.”

Introduced in March 2009, Sallie Mae’s Smart Option Student Loan is one of the first loans of its kind to help save college students money by requiring interest payments while in school and shortening the repayment term. The company designed the $25 payment plan to make it easier for families who understand the benefits of making in-school payments but want a standard, fixed monthly payment amount. Sallie Mae has also introduced benefits such as an on-time payment reward and faster cosigner release.

Whether students attending degree-granting institutions elect monthly in-school payments of $25 per month or elect monthly full interest payments, they will benefit this year from Sallie Mae’s lower interest rates and zero disbursement fees. Based on today’s LIBOR index of 0.375, undergraduate and graduate student rates for the $25 per month payment option range between 3.85 percent and 10.48 percent; rates for the full interest payment option range between 2.87 percent and 10.21 percent.

Over the summer, the company is inviting students to tweet about how they plan to make the Smart Option Student Loan work for them for a chance to win $500. The public is invited to vote every week to pick finalists and then each month to select a grand prize winner for June, July and August.

Sallie Mae recommends private student loans to help bridge the college financing gap after exploring scholarships, grants and federal student loans. For more information, visit www.SallieMae.com/loansmart.

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