Since the 1970s, Sallie Mae has serviced or provided education loans for families to pay for college and graduate school. Sallie Mae loan consolidation was also available in the past, but they’re no longer an option for borrowers.
That said, you might have federal loans that are eligible for direct consolidation through the federal government. But your private student loans won’t be eligible for federal consolidation — only for student loan refinancing.
In other words, if you’re searching for alternatives to Sallie Mae loan consolidation, your options will be different depending on whether you have federal or private student loans.
Sallie Mae loan consolidation is no more
Before 2008, Sallie Mae offered consolidation loans. If you had multiple student loans, you were able to combine them through Sallie Mae consolidation.
But Sallie Mae no longer offers a consolidation loan, nor does it offer student loan refinancing. The company now primarily provides private student loans for college, as well as for career training and K-12 schools.
Of course, just because Sallie Mae consolidation loans are no longer a thing doesn’t mean you’re out of luck. Borrowers have a wide range of choices for repaying their student debt, whether they need consolidation (for federal loans only) or refinancing (for federal or private loans).
Consolidation for your federal student loans
If you have federal student loans, you can consolidate them with a federal Direct Consolidation Loan. Any recent Sallie Mae loans won’t count since those are private, but people who borrowed years ago might have once had their federal student loans serviced by Sallie Mae, as it used to be a government-sponsored entity before it became a private company.
Furthermore, federal student loans serviced by Navient (an offshoot company of Sallie Mae) could also qualify. According to Federal Student Aid, Stafford Loans, Direct Loans and Direct PLUS Loans are all eligible for consolidation.
Consolidation can help you manage repayment more easily since you’ll only have a single bill to track. Plus, it lets you choose new terms for the loan, perhaps extending them to 20 or 25 years.
Extending your terms could help if you’re struggling to pay your bills since your monthly payment will go down. But it also means you’ll be in debt for longer, so you’ll pay more interest over the life of the loan.
Plus, consolidation could cause your interest rate to slightly increase, as your new rate will be the weighted average of your previous rates rounded up to the nearest one-eighth of a percentage point. Still, this increase in interest might be worth it if you need the relief that comes with lower monthly student loan bills.
Refinancing for both federal and private student loans
Another repayment option is student loan refinancing. Although Sallie Mae doesn’t offer refinancing, other banks, credit unions and online lenders do. Leading lenders in the refinancing space include Citizens Bank, Sofi and Earnest.
Both private and federal student loans are eligible for refinancing. You can choose to refinance a single loan, perhaps to lower its interest rate, or to refinance multiple loans to combine them.
Note that if you refinance federal student loans, they essentially become private loans. As a result, you lose access to federal programs and protections such as income-driven repayment plans and Public Service Loan Forgiveness.
To refinance, you must meet a lender’s underwriting requirements for credit and income — or apply with a cosigner who does. Depending on your or your cosigner’s creditworthiness, you could qualify for lower interest rates than the ones you have.
Plus, you can choose new repayment terms, perhaps lengthening your term to lower monthly payments or shortening it to move up your repayment date.
Estimate the long-term costs before you make changes
Both consolidation and student loan refinancing give you the opportunity to restructure your debt in a way that makes it easier to repay.
Consolidation can simplify your debt and lower your monthly payments with a longer repayment term. But refinancing could save you money with a lower interest rate and also allow you to select a shorter or longer term, depending on what your goals are.
Whichever option you choose, make sure you understand how it could impact your finances.
Play around with our student loan payment calculator to estimate the short- and long-term costs of consolidating or refinancing. And if you choose refinancing, shop around to get your best rates.
By getting a clear understanding of your costs of borrowing, you can make an informed choice about refinancing or consolidating your Sallie Mae or federal student loans.
Rebecca Safier contributed to this report.
