College-Bound Students Take Note: July 1 Brings New, Lower Student Loan Interest Rates

(BUSINESS WIRE)--Here’s news that 19 million people signing up for college classes this fall may want to hear: if you’re considering student loans to help foot the tuition bill, you may qualify for lower interest rates.

For the 2010-2011 academic year, rates on need-based federal Stafford student loans will decline from 5.6 percent to 4.5 percent, says Sallie Mae, the nation’s leading saving, planning and paying for college company. As a result, if you borrow $5,500 and pay off in the standard 10 years after graduation, you can save an estimated $350—enough for a semester’s worth of books or a month’s car payment. Rates on non-need-based federal Stafford loans remain 6.8 percent.

To qualify for federal student loans, you must first fill out the government’s Free Application for Federal Student Aid, also known as the FAFSA.

Keep in mind that the maximum amount you can borrow in federal Stafford loans varies between $5,500 and $7,500 for undergraduate students, depending on your year in college. To qualify, you also need to attend school at least half-time. Another change beginning July 1: federal Stafford loans will come directly from the U.S. Department of Education.

Sallie Mae’s Smart Option Student Loan also has lower interest rates for upcoming academic year, ranging between 2.88 percent and 10.25 percent for degree- seeking students, based on today’s LIBOR index. A customer’s actual interest rate depends on credit history and whether a cosigner applies, among other factors and will reset periodically based upon future changes in the LIBOR index. In addition, the company recently eliminated disbursement fees and added an on-time payment award. This private loan from Sallie Mae is available to help you fill the gap between the school’s cost of attendance and your other financial aid.

With Sallie Mae’s Smart Option Student Loan, students pay interest while in school, graduate with less debt, and pay off their loans faster, saving more than 50 percent in finance charges over the life of their loan. A typical freshman borrowing $10,000 makes payments of principal and interest for only seven years after graduation rather than 15 years. The customer saves approximately $8,800—compared to other private student loan alternatives in which no payments are made until after graduation. For more information, visit www.SallieMae.com/loansmart.

Sallie Mae advises families to follow the 1-2-3 approach to paying for college: first maximize scholarships and grants, along with savings and income. Second, explore federal student loans. Third, fill any gap with a pay-interest-as-you-go private education loan.

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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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