If you’re headed to college this upcoming semester, you’re likely stressed out over how to pay for it, especially if you’ve already exhausted federal aid. Private loans can help you cover the cost, but how do you choose a lender?
Sallie Mae student loans are a popular option for many undergraduates. If you’re considering taking out a loan, here’s what you need to know first.
Sallie Mae’s Smart Option Student Loan review: The basics
Sallie Mae designed the Smart Option Student Loan specifically for undergraduate students. With this loan, you can borrow up to the total cost of attendance. There are no origination fees, and you can choose between fixed and variable interest rates.
There are a few features that set this loan apart from the offerings of other lenders.
1. Choice of repayment options
Sallie Mae allows you to choose between three repayment options:
Deferred repayment: You’re not responsible for making payments while you’re in school and for six months after graduation. You’ll pay more in interest with this repayment option since interest accrues while you’re not making payments, but the extra time before payments are due can help you focus on school and landing a job.
Fixed repayment: With this option, you pay $25 a month while in school and during your grace period. According to Sallie Mae, opting for this repayment plan can help you save 12% on your total undergraduate student loan cost.
Interest repayment: Under an interest repayment plan, you pay the interest every month while in school and during the six-month grace period. According to the company, paying the interest in school can help you save about 25% on your total loan cost.
2. Free credit score
If you take out a Sallie Mae loan, you can get a quarterly report on your FICO credit score. Having your report helps you keep your finances on track.
3. Interest-rate reduction for automatic payments
Sign up for auto-debit payments and you could get a 0.25 percentage point reduction on your interest rate. Over the length of your repayment term, that modest change to your rate could help you save money. Plus, it minimizes the chances of you missing a payment and becoming delinquent.
If you’re facing a significant financial hardship, such as a job loss or medical emergency, you might qualify for forbearance. That means you can temporarily stop making payments for up to 12 months without defaulting on the loan.
Sallie Mae requires you to make a $50 good faith payment on each loan — up to a maximum of $150 — to enter into forbearance. Sallie Mae advises borrowers to contact it as soon as possible if they think they will miss a payment.
If you decide to go back to school, you can enter your loans into deferment, meaning you can postpone making payments for up to 48 months. Interest will continue to accrue during this time, but a deferment can give you the time you need to focus on your education without worrying about payments.
6. Cosigner release
After you graduate, make 12 on-time principal and interest payments — and meet certain other credit requirements — and you may qualify for a cosigner release. That means you could ask Sallie Mae to remove the cosigner’s responsibility from the loan.
7. Loan discharge
If a student loan borrower dies or becomes permanently disabled, Sallie Mae will forgive the remaining loan balance rather than require the borrower’s family to make the payments.
What we like about Sallie Mae student loans
All private lenders are not created equal. Sallie Mae’s Smart Option Student Loan stands out for several reasons.
1. Better repayment plans
Many private student loan lenders require you to start making payments right away — on both interest and principal. While you’re in school and job searching, keeping up with those payments can be difficult, if not downright impossible.
Sallie Mae’s repayment options allow you to choose a plan that works for you and your budget. As an added perk, if you can afford to make interest and principal payments while in school, Sallie Mae will give you an interest rate that is one percentage point lower than that of borrowers who choose to defer payments. That difference can result in significant savings.
2. More options if you can’t afford payments
Most private lenders require you to keep up with payments no matter what. Unlike federal loans, not all private lenders allow you to postpone making payments, even in the case of severe financial hardship. Sallie Mae allows you to defer payments or enter into forbearance, helping you get back on your feet.
3. Easier cosigner release requirements
Some lenders don’t offer cosigner releases at all, while others require years of on-time payments before you can even apply for a cosigner release. Sallie Mae asks for just 12 months of on-time payments, making it easier to get your cosigner removed from the loan, so long as you meet the other requirements. Eliminating your cosigner from the loan can help improve your relationship with that person and prevent any tension over money.
4. Disability discharge
There have been nightmare cases where borrowers have become disabled or even died, and student loan lenders came after their loved ones for the money owed. Unfortunately, private student loan lenders are not required to forgive the remaining balance, so many will try to collect on the balance due, no matter what.
Sallie Mae is one of the few lenders that will forgive the remaining loan balance in the cases of death and disability, giving much-needed relief to borrowers and their loved ones.
Is Sallie Mae’s Smart Option Student Loan right for you?
If you’re a high school senior or undergraduate student in need of more financing for school, Sallie Mae student loans might be a wise choice. Sallie Mae’s Smart Option Student Loan offers more benefits and choices than many private loans, making it easier to repay after graduation.
But before applying for a loan, make sure you get quotes from multiple private student loan lenders so that you can compare offers and make an informed decision.
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