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December 14, 2020
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Sallie Mae Private Student Loans Review

An important factor when choosing a college is acknowledging whether you can afford the cost of attendance or not. Fortunately, there are many options for students who wish to further their education but don't have the financial means to pay themselves.

It’s generally understood that students seeking financial aid for school should exhaust all available options before turning to private student loans. That includes pursuing federal student loans, applying for scholarships or grants, considering work-study programs, among other alternatives. However, private student loans can help students who don’t qualify for any of the aforementioned options or just need additional help to pay ever-increasing higher education costs.

Sallie Mae is one of the largest private student loan servicers in the country, providing many financing options for higher education students and their families.

PROS

Variety of loan products. One of Sallie Mae’s main advantages is its diverse product offerings. Not only does it provide loans to undergraduate and graduate students, but it also offers loans for students in non-degree-granting institutions for professional training and trade certificate courses. Parents who wish to pay for their children’s college education, as well as K-12 private schooling, can also apply for loans.

Graduate students who are specializing in healthcare or law can choose from an array of options including loans for residency, relocation, and bar study.

Provides loans to part-time students. Sallie Mae is one of the few private student loan providers that allows part-time students (less than half-time enrollment) to apply. Federal loans and most private student loan companies require students to be enrolled at least half-time (generally, six credits at a time). This significantly reduces the options some students have to borrow money to pay for school.

Allows for co-signer release. Private student loans carry a cosigner if the student’s FICO score isn’t sufficient for approval, or if the addition of the co-signer gets a lower interest rate on the loan. Whichever the case may be, many private student loan lenders do not provide the option for removing a co-signer at some point in the future, even if the borrower has become capable of assuming the debt themselves. In these situations, a borrower will usually need to refinance their loan to remove a co-signer.

However, Sallie Mae is one of the few private student loan servicers that does allow for co-signer release. The borrower must have graduated, completed 12 on-time payments (principal and interest), and meet specific credit requirements to be able to apply for co-signer release.

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CONS

No pre-qualification/hard credit pull. Several, though not all, private student loan providers offer pre-qualification options. By answering basic questions about their credit history and financial profile, borrowers allow lenders to perform a soft credit check on them which results in a more detailed loan overview including rates, terms, and the amount available to borrow.

Unfortunately, Sallie Mae does not offer pre-qualification. Therefore, to be able to get an idea of how much money you can borrow or the rate you’ll be charged, you’d have to complete the application process. The process entails a hard inquiry that will show up on your credit report and lower your credit score.

Limited information on qualifying parameters. As with any other type of lending product, before choosing a private student loan provider, customers should shop around for the best deal. That means comparing rates, terms, and costs, as well as knowing the minimum requirements. While Sallie Mae’s website provides some information (such as general rates), factors like minimum credit score or minimum income are not disclosed. This forces the borrower to go through the application process before knowing if they can even be approved.

Sallie Mae Student Loan Options

Sallie Mae provides an ample variety of education loans for both full-time and part-time students. Undergraduate and graduate studies have their own specific types of loans. There are also parent loans for guardians that want to help out their child’s studies, and career-specific loans for law, medicine, dentistry, and other health professions.

Among Sallie Mae’s private student loans are the following:

  • Undergraduate
  • Career Training
  • Parent
  • Graduate
  • K-12
  • MBA
  • Medical School
  • Medical Residency
  • Dental School
  • Dental Residency
  • Health Professions Graduate
  • Law School
  • Bar Study

Undergraduate loans have terms of 5, 10, or 15 years, while graduate loans have a term of 15 years. Other specialized loan options have 15- or 20-year terms, depending on the loan.

Sallie Mae Rates

In contrast to federal student loan rates, which are fixed interest rates and generally lower, private student loan rates are set by each lender and based on several factors, including market tendencies and the borrower’s or cosigner’s credit profiles.

Sallie Mae offers both variable interest rates and fixed interest rates. Due to changes in the marketplace, these rates can fluctuate from time to time. As of December 2020, Sallie Mae’s private student loan rates are:

For undergraduate student loans:

Variable: From 1.25% to 11.10% APR
Fixed: From 4.25% to 12.35% APR

For career training student loans:

Variable: From 4.25% to 11.64% APR
Fixed: From 6.62% to 13.83% APR

For parent loans:

Fixed: From 5.49% to 13.87% APR
Variable: From 3.50% to 13.12% APR

Graduate student loan rates vary depending on the type of loan.

Applicants or co-signers with higher credit scores will typically receive the lowest rates. APRs can also vary depending on the type of loan requested, by choosing an in-school repayment option, and by using the auto-debit feature, which will net you a 0.25 percentage point discount.

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Sallie Mae Costs and Fees

As a private lender, Sallie Mae does not charge some of the fees federal student loans carry. For undergraduate and graduate loans, it does not charge an application or origination fee, nor does it charge you a prepayment penalty for paying out your loan before it is due.

Even without the fees associated with applying, Sallie Mae does levy late fees for payments that are not on time: either 5% of the past due payment or $25, whichever is less.

Sallie Mae Repayment Options

Repayment plans for private student loans differ from those for federal loans. Sallie Mae offers private student loan repayment terms for when you’re in school and assistance programs for after you graduate.

While you’re in school, you can choose from three repayment options:

  • Deferred payment - You don’t have to make monthly payments while you’re enrolled in school or during the subsequent grace period.
  • Fixed repayment - You pay a fixed amount each month from your bank account while you’re enrolled in school and during the subsequent grace period.
  • Interest repayment - You only pay interest every month you’re enrolled in school and during the subsequent grace period.

Certain loans, such as Bar Study and Medical or Dental Residency and Relocation, are only eligible to choose the deferred payment option.

Once students leave school and after the grace period ends, borrowers are required to make principal and interest payments for the remainder of the loan term. However, there are options if additional time is needed or if personal circumstances have changed. Borrowers can choose:

  • The Graduated Repayment Period - Specifically tailored for Sallie Mae’s undergraduate and graduate student loans, this option allows borrowers to make interest-only payments on the loan amount for one year after the grace period ends.
  • Deferment because of continuing education - Postponement or reduction in repayments if borrowers are continuing other undergraduate or graduate studies or have an internship, clerkship, fellowship, or residency.
  • Deferment or forbearance due to military service - Lets active duty members request and receive either deferment or forbearance for their payments.
  • Forbearance due to temporary financial difficulty- Allows for the postponement of repayments if facing financial hardship. This option will invariably raise the total amount of the loan cost.

Besides the aforementioned student loan payment options, Sallie Mae offers alternatives for customers who are delinquent with their payments. Eligibility for these options will hinge on each borrower’s financial situation and must be managed directly with Sallie Mae.

Before requesting any of these options, borrowers should examine if there are other ways they can continue to make their payments. Borrowers should also calculate whether the postponement of payments is worth the additional cost it carries.

Sallie Mae Company Information

Sallie Mae was originally created in 1972 as a government-sponsored enterprise called the Student Loan Marketing Association. It originated and serviced federal student loans for over 30 years before its federal charter was terminated. Sallie Mae is now a publicly traded corporation that specializes in private student loans and provides consumer banking.

Sallie Mae FAQs

What are the differences between federal student loans and private student loans?

Federal student loans are given by the government and include favorable interest rates and repayment options for borrowers set by the law.

Private student loan servicing is provided by financial institutions such as banks and credit unions, with rates, terms, and conditions set by the lenders. Private student loans are, for the most part, more expensive than federal loans.

Do private student loans qualify for loan forgiveness programs?

While federal student loans could, in some cases, qualify for debt forgiveness, private student loans are not eligible for such benefits. Nonetheless, Sallie Mae can waive the current balance of the loan in such cases such as permanent disability or death.

Sallie Mae: Summary and Key Takeaways

  • An ample variety of loan products for undergraduate, graduate, and professional training students
  • Loans available for part-time students (those with a less than half-time course load).
  • No pre-qualification available. Borrowers must complete the application process to find rates and terms.
  • Limited minimum requirement information available online.
  • Co-signer release available when certain requirements are met.
  • Repayment options in-school and after school.
  • Deferment and forbearance options for selected cases, though it usually raises the total loan cost.