Private Student Loans Changing Under Sallie Mae
The nation’s leading provider of student loans and administrator of college savings plans, Sallie Mae, has announced that they are making important changes to their private student loans, a move which could have industry wide ramifications. Specifically, Sallie Mae will now be requiring borrowers to make monthly interest payments even while they are still in school.
This new loan arrangement, which will begin on March 23rd, is designed to help borrowers reduce their overall loan interest, but the move will also make it more difficult for some students to qualify for a loan, especially when financial aid options are limited.
Repaying Student Loans While Still In College
Sallie Mae’s move flies in the face of what students usually expect when borrowing money to pay for college. Instead of deferring making payments until after they graduate, students will have to begin making interest only payments while they are still taking classes. According to Sallie Mae, the move will actually help students save on interest expenses, while also shortening the loan repayment terms from five to fifteen years. Up to now, Sallie Mae private student loans could be repaid between fifteen and thirty years.
Students who have been scrambling for funding to aid with college are likely to find Sallie Mae’s moves to be unsettling. Private student loans already carry higher rates than harder to get federal loans, therefore the shorter repayment times will mean that borrowers will have to pay higher amounts each month for their loan payments. That move will put private lending out of reach for more students, perhaps making it impossible for some to attend college.
Fewer Loans Thanks To Tougher Lending Requirements
As recently as last year, college students flocked to private student loans, finding them much easier to get than federal Stafford loans. However, when credit markets tightened, private lenders left the business in droves while the remaining lenders strengthened their lending requirements.
Students who need funds may want to consider Parent PLUS loans which have been changed to allow parents to begin making payments after their children finished school. Previously, that loan option required payments to begin within sixty days of the loan’s issue. In addition, applying for college scholarships can help lower costs too.
See also: Setting up a college budget
Source: Sallie Mae