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Higher education is expensive. Long gone are the days when a student could finance their education with a full-time summer job as a camp counselor. Education costs have far outstripped the pay rates for most student-level jobs, and so most students need to augment their financial situations with loans. While students will likely first gravitate to federally-backed loans available by filling out the ubiquitous FAFSA form, that is often not adequate to cover the full cost of education.
Sallie Mae has arisen as one of the top private lenders for student loan needs. They offer assistance for tuition payments as well as financing residencies, clerkships, and formal internships that are often the capstone of one's education.
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What Is Sallie Mae?
Sallie Mae Corporation, commonly known as Sallie Mae, began as an administrator for federal student loans. Their federal charter was terminated in 2004 and the agency continued for several years in somewhat of a grey area. Until 2010, Sallie Mae serviced loans under both the William D Ford Direct Loan Program and the Federal Family Education Loan Program. Now, Sallie Mae is a private lender much like any other. Their loans are neither guaranteed nor insured by the federal government. However, they maintain the lion's share of their business in the student-loan industry.Read More
These days, Sallie Mae helps students discover creative ways to finance their education through clever use of savings, scholarships, and grant money. They also help students find federally-backed loans before offering their own loans to help bridge any remaining financial gaps. Thus, Sallie Mae loans are often the lender of last resort for students who have exhausted their credit with federal lenders.
Students also use Sallie Mae's services to find loan repayment programs. Students frequently rack up debts from federal and private education lenders, credit cards, and other sources and need to consolidate their loans so that the debt is more easily managed. Sallie Mae also helps students with refinancing options which can restructure the loan with new interest rates but with little flexibility in terms of repayment.
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Types of Loans Available
- Undergraduate Private:
Sallie Mae helps students cover educational costs that are not covered by federal loans, scholarships, or grants. When it comes time to repay the loans, students can choose between loan deferment plans, fixed repayment plans, and interest repayment. They also offer an incentive to set up auto-debit payments that are incentivized with a deduction on the loan's interest rate. Students can make fixed or interest-only payments while they are still in school. Otherwise, mandatory payments begin after a brief post-graduation grace period.
If a parent wishes to take over all or part of their child's educational costs, this is a great option. These loans can be used to cover a child's undergraduate or graduate education. Parents can also use this loan type to cover certificate programs and virtually any education that comes from a degree-granting institution. If a student does not need a cosigner, this is a great way for a parent to provide extra funds on their own terms.
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- Graduate School:
Graduate students often can find funded programs that eliminate, or greatly reduce, tuition costs in return for work as a teaching assistant. However, all graduate students need to pay full tuition for at least their first term or two, until their application for an assistantship is approved. Thus, a Sallie Mae loan can finance those early courses. Graduate school loans have similar repayment plans to Sallie Mae's undergraduate loans in that customers can work with loan deferment plans, fixed repayment options, and interest repayment.
Business school students who need help financing the remainder of their graduate work can turn to Sallie Mae for assistance. Sallie Mae's loan structure offers a 15-year repayment term, after which all principal and interest should be eliminated. They also offer MBA students the ability to choose between variable and fixed-rate loans. Loans are available to cover any amount from $1,000 to full tuition. Since teaching assistantships are less common for MBA students, a Sallie Mae student loan can facilitate this advanced degree, thus facilitating a brilliant career.
- Medical School:
Sallie Mae offers loans for students training for careers in allopathic, osteopathy, podiatry, radiology, sports, or veterinary medicine. This loan type does not cover naturopathic, chiropractic, or education in Chinese medicine. Students of the various healing professions will appreciate that Sallie Mae offers loans to cover the time spent in all-important residencies, as well as the nearly inevitable relocation that comes after medical school.
- Dental School:
Not only does Sallie Mae offer loans to cover general dentistry students, but loans are available to cover endodontic students, future oral and maxillofacial surgeons, orthodontic students, pediatric dentistry, periodontics, and prosthodontics. With a choice of variable or fixed rates and three repayment options, dental students of all types can finance their remaining education under the best terms.
- Graduate School for Health Professionals:
Sallie Mae covers future doctors in their quest to finance medical school, and they also provide and service loans for others in the health professions. Students of nursing, allied health fields, pharmacy, and others in health-related degree programs can find financial assistance through Sallie Mae. Graduates can choose between fixed and variable interest rates, though the loan terms include a 15-year repayment plan after which time all outstanding principal and interest should be paid.
- Law School:
Law school is notoriously expensive, does not allow students time to work outside of school, and never offers teaching assistantships. However, there's no need to shy away from the more expensive programs if they offer the ideal training. Sallie Mae helps law students find the best payment options so that they can launch a legal career under the best loan repayment plan possible. Borrowers can choose between fixed and variable rate plans according to what works best for their situation.
- Bar Study:
Once law school is over, graduates still need to pass the bar exam. For many, that can involve a long period of preparation and study. Thus, Sallie Mae offers bridge loans so that lawyers-to-be can focus on studying before seeking full-time work in a law firm. To qualify, borrowers need to be enrolled at least half-time in an ABA-accredited law school or have graduated from such a program within the previous 12 months.
- Medical Residency and Relocation:
Medical and veterinary students must all complete a residency prior to venturing out into their careers. During this transition time, residents often need funds to cover non-school-related costs, including relocation costs to their first real job. To qualify for this loan type, future veterinarians need to have graduated from a program accredited by the American Veterinary Medical Association. Medical professionals need to have credentials from institutions accredited by the Liaison Committee on Medical Education or the American Osteopathic Association's Commission on Osteopathic College Accreditation. Podiatry professionals should be enrolled in or have graduated from a program accredited by the Council on Podiatric Medical Education.
- Dental Residency and Relocation:
Like medical and veterinary students, dental students and residents often have significant non-school-related expenses that arise between the final year of dental school and the start of their first job. Sallie Mae loans can be used to cover the costs that arise as a result of board examinations, career preparation, and any relocation costs arising from a residency or the move to a new town. Borrowers must be either in their final year of dental school or have graduated within the 12 months prior to applying for the loan.
A cosigner is a person, ostensibly with a great credit score, who is willing to act as a secondary party to the loan. They do not receive any of the loan funds, but they do assume significant responsibility for the debt. Frequently, in the case of student loans, the debt responsibility is shared by the student's parents.
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Students, especially undergraduates, often don't have very strong credit histories. Even if they have satisfied their other loan obligations, and even have decent scores, they may still not have the robust history that loan underwriters like to see. For that reason, they may be required to find a cosigner for their loan. Lenders like Sallie Mae ask for cosigners so that the loan is better secured than if it is held in the name of the student alone. That is, if the student is unable or unwilling to make payments, the lender can ask the cosigner to make payments. This will also allow the loan to be completed with a lower interest rate because there will be less risk on the part of the loan provider.
For those who have graduated and have made 12 consecutive, on-time and complete payments on the principal and interest of the loan, it is possible to release their cosigner from the debt. For those who used their parents as cosigners, this is often an attractive option and one that their parents will appreciate. The student's parents, in particular, will be pleased to have their credit freed up for other matters such as a car purchase or any other situation in which a loan is required.
Sallie Mae has an application process for releasing a cosigner that asks for proof of graduation from the degree or certificate program in question. Borrowers also need to submit documentation such as proof of income, credit rating, and proof of citizenship or residency status. Essentially, Sallie Mae needs to know that their loan is now in the hands of a responsible adult who is capable of making appropriate payments.
What to Expect in Loan Applications
The loan application process can be very exciting. Students are eager to secure a loan and thus launch themselves into a new career and an exciting life. Before applying for a Sallie Mae loan, students need to make sure they have all the proper paperwork handy.
- Your Information:
The Sallie Mae student loan application asks that students provide their full name, address, social security number, employment information, and other financial information. If the student is renting or mortgaging a residence, those payments will need to be included. If the student has any other assets or investments, that will be helpful for the application.
- Loan Application Info:
When applying for a loan, borrowers need to have an approximation of their upcoming student costs. For those who are applying for a medical residency loan, try to ask for an amount that is below the maximum loan amount. For residency loans, borrowers can opt to have the loan disbursed in two payments. The payments needn't be equal, so borrowers can opt to have the larger portion sooner or later at their discretion.
Where Do These Loans Go?
- Disbursements to the School (Private Loans and Financial Aid):
A loan disburses to a student's school when it is intended to cover educational costs alone. The school will report all applicable fees to Sallie Mae so that only the proper amount is added to the student's debt statement. Much like a federal student loan, students need only apply for the loan one time, and then Sallie Mae will pay their tuition for each term.
- Direct-to-Student Disbursement:
This type of disbursement is for loans that are intended to help cover the ancillary costs of education, such as books, new computers, room and board, transportation, and other pertinent supplies. These disbursements are also common for loans designed to assist medical students through their residency period or to give law students time to study for the bar examination. Dental students also use these loans, as do veterinary students. The reason these loans disburse to the student and not to the school is that often the student has completed their degree program but has an interim period before starting their first job in their profession. This financial assistance is designed to help ease that interim period so that the student can make the most of their degree.
What Can You Use Your Loans For?
Sallie Mae student loans are typically used to pay tuition or other fees directly to a student's school or other degree-granting institution. Once the loan application has been received and approved, Sallie Mae will pay the school what is owed for each term. However, there are other uses for a Sallie Mae student loan.
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These loans can be applied towards other expenses such as room and board, new computers, books, and general school supplies. In fact, some professional school graduates, such as doctors and lawyers, take out loans to help them bridge the gap between graduation and their career lives. That is, they may need to complete residencies or study for the bar exam before they can begin working in their fields. Many, especially doctors, need to move away upon completing their residencies. Sallie Mae loans help them move, pay bills, and generally live comfortably until they land their first professional job.
Repayment plans are one of the biggest parts of attaining a loan. All borrowers need to inspect their lender's repayment plan options before signing the loan documents. It will be helpful to know what to expect when, after graduation, payments come due.
While still in school, there are three ways to repay a Sallie May student loan: deferred payments, fixed repayment, and interest repayment. Deferred repayment is one of the most popular options. When students defer their payments until graduation, there is no need to manage monthly payments on top of meeting day-to-day financial obligations.
Fixed repayment locks in a set amount that is due every month. These payments are also due during a normal post-graduation grace period. This option helps students reduce their post-college debt load and instills good repayment practices while still in school.
Finally, interest repayment doesn't help to reduce the overall principal amount of the loan, but these payments ensure that no interest accrues while one is still in school. Thus, after graduation and the subsequent grace period, students won't have as much, if any, interest accrued on their principal loan amount.
In-school repayment plans all expire after graduation and the subsequent grace period that Sallie Mae allows for the sake of students finding a great first job as well as paying all the startup costs of a new life such as apartment deposits, new work clothes, etc.
The regular payments from that point forward must each cover interest and pay off some principal. However, there are three exceptions:
- Graduated Repayment Period
- Deferment for additional schooling
- Forbearance for borrowers who have trouble making payments.
Sallie Mae understands that borrowers sometimes run into trouble or financial setbacks. Forbearance is an option that allows them to postpone payments until they become manageable. While this will help protect your credit, borrowers should know that their loans will continue to accrue interest during the forbearance period. Borrowers should be sure to discuss this matter with their cosigners. After all, their credit and debt load are impacted as the interest amount rises.
Deferment is another way to postpone one's student loans. Sallie Mae will allow borrowers to defer payments if they return to school for another degree. The principal loan amount will continue to accrue interest, but students won't need to budget for monthly payments. Sallie May extends deferment plans to borrowers who enter a formal internship, clerkship, fellowship, or residency.
Note that deferments last up to 48 months, the typical amount of time it takes to complete an undergraduate degree. Students will need to send Sallie Mae proof that they are enrolled in a degree-granting program. Most schools should be able to handle this electronically. There are separate requirements for those in residencies, however.
For those pursuing residencies, internships, or clerkships, deferment is a possibility. Borrowers who have a Smart Option Student Loan can defer payments for up to 60 months provided that they can verify their status in one of these educational positions. Sallie Mae has special forms that cover these matters, and many employers may already have protocols for helping their interns, clerks, and residents defer their loan payments.
Student Loan Refinancing and Consolidation
Sometimes loans and payments become unwieldy. For that reason, Sallie Mae can help borrowers by temporarily reducing their interest rates so that borrowers can recoup their financial standing. This helps to contain the loan or at least slows its growth for a period of up to 12 months. After that point, borrowers must reapply if they still need assistance. It is also possible to refinance or consolidate a Sallie Mae loan. Note that Sallie Mae will only reduce rates to 3 percent.
Sallie Mae does not offer refinancing, but it is still a possibility. What essentially happens in this process is that the original Sallie Mae loan is paid off with a newer loan, at a reduced interest rate, and with a restructured repayment plan.
To take out a new loan, borrowers will need to seek out another private student loan lender. Then they'll need to apply for the loan as though they were going to school all over again. When the new loan is approved, borrowers should make sure that the new repayment plans match their needs and financial situation. If they can lock in a low enough rate, a fixed interest rate might be preferable to a variable rate. That's because a fixed-rate plan ensures that the monthly payments remain static over the life of the loan. While interest rates may fall over the course of repayment, they might also rise, making variable interest plans risky.
Tips for Early Repayment
- Automatic Payments:
This is a fantastic option for borrowers who are busy and would like to take one more bill off their monthly agenda. Sallie Mae will automatically retrieve payment from the borrower's bank account each month on a set date. Borrowers thus only need to ensure that the funds are available at that point in the month. Not only is this a matter of practical convenience, but borrowers receive a .25% rate reduction when they opt for automatic payments.
- Make Some Payments While in School:
Borrowers can reduce their long-term debt load by making student loan payments while still in school. Some might be able to begin making full interest/principal payments, but there are other options. Fixed payments are one way to start chipping away at one's debt while still in school. Another clever way to get ahead on loan payments is by setting up interest payments. This way, the loan won't accrue value while classes are still underway.