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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Sallie Mae Launches New Income-Based Repayment Plan

(BUSINESS WIRE)--Sallie Mae, the nation’s leading saving-, planning- and paying-for-education company, today announced a new repayment plan to help eligible federal student loan customers substantially lower their monthly payments.

The new “income-based repayment” option, or IBR, which was authorized by federal law to begin on July 1, will enable federal student loan customers experiencing financial difficulty to cap their monthly bill at 15 percent of their discretionary income. IBR also allows eligible customers making qualifying payments to extend from the standard 10-year term to up to 25 years, after which any remaining balance will be forgiven.

For example, a new college graduate with an entry-level job at $31,000 and $31,000 in federal Stafford loans would pay approximately $170 less per month compared to the payment due under the standard plan.

“Sallie Mae is committed to providing students not only with the resources needed to invest in higher education, but also with the tools to help them succeed afterward,” said Albert L. Lord, CEO. “We are pleased that our value-added IBR seminars have assisted students on all types of college campuses, including Direct Lending schools. This is another example of how competition leads directly to enhanced services for students and schools.”

With today’s launch, Sallie Mae offers a new student loan repayment calculator, available at www.SallieMae.com/repaymentcalculator, to help customers assess whether they qualify for the new plan, compare it to alternatives, simulate IBR results under different income assumptions, assess the likely time to pay in full and evaluate the total cost of each option. An eligibility worksheet, an in-depth repayment options presentation and materials geared for students who are likely to qualify, as well as information on loan forgiveness for public service professions, are also available from Sallie Mae at www.SallieMae.com/ibr.

These new resources build on other outreach efforts Sallie Mae has undertaken to build awareness about IBR and assist students on customer and non-customer (Direct Lending) campuses. In January, Sallie Mae began holding workshops and in-person visits to educate financial aid professionals and their students about the program. In March, Sallie Mae identified students likely to benefit from the new repayment plan and started educating those individuals about it with targeted counseling.

“Income-based repayment is an important new tool to help our graduates stay on track to financial success,” said Tara Olsen, director of financial aid, Tufts University School of Medicine. “Sallie Mae’s repayment strategies sessions did an excellent job of translating complex details into practical tips, and as a result our graduating students have a much better understanding of their options. As we transition to a Direct Lending school this year, we are grateful that Sallie Mae has continued to provide assistance with the education of our students.”

Under federal law, student loan customers are eligible for income-based repayment if they demonstrate financial need as defined by the Department of Education based on a formula that considers the individual’s income, federal student loan balance and household size. The monthly payment is capped at 15 percent of discretionary income and is reset each year.

The IBR option provides an alternative payment schedule for individuals with high federal student loan payments relative to their income. It may be particularly helpful to new college graduates who are unable to find employment at the levels they had expected—or for those with advanced degrees, such as law school graduates or medical residents, who have accumulated higher-than-average federal loan balances through their undergraduate and graduate programs. IBR, however, may not be the best option for all eligible customers as they may end up paying more in interest charges over the life of the loan since the option extends the repayment term.

Additionally, July 1 will bring other changes to help college-bound students make the investment in higher education. The maximum Pell Grant award will rise to $5,350, an increase of $619, and more families will be eligible to claim an expanded tax credit of up to $2,500 for higher education. In addition, account owners of tax-advantaged 529 college savings plans will be able to count the purchase of a computer for a beneficiary college student as a qualified education expense in 2009.

Finally, for the second year in a row, interest rates on need-based subsidized federal Stafford undergraduate loans will decline: the interest rate for newly disbursed loans will be 5.6 percent, down from 6.0 percent last school year. In accordance with current law, undergraduates with unsubsidized Stafford loans and graduate students will continue to pay fixed interest of 6.8 percent. In addition, the origination fee the government charges for each new Stafford loan will change to 0.5 percent, down from 1 percent.

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