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Sallie Mae Private Student Loan Review

Loans, Student Loans

A Sallie Mae loan may be a good option for you if you’ve borrowed all the federal student loans you’re eligible for and you still need money to cover your college costs. Before looking to private loans such as Sallie Mae’s, submit the Free Application for Federal Student Aid, known as the FAFSA, to make sure you’ve exhausted all federal aid options.

The U.S. government started Sallie Mae in 1973 as part of the federally guaranteed student loan program, and the company has since evolved quite a bit. In 2004 it became a private company, and for a short stint it serviced federally issued student loans. In 2014, it split from what is now the federal student loan servicer, Navient, and has since been focused on originating and servicing private student loans to undergraduate and graduate students — and, as of recently, parents.

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At a glance

  • Fixed: 5.74% to 12.87% APR. Variable: 3.37% to 12.74% APR.
  • Six-month grace periods, five- to 15-year terms
  • Deferment and forbearance options available

*Rates updated Jan. 2, 2018

The weighted average Sallie Mae loan interest rate was 7.93% in 2015, according to the company’s 2015 annual report. Like many other private student loan lenders, Sallie Mae lets you defer your loans if you go back to school at least part time. It also offers forbearance in three-month increments for up 12 months if you need to take a break from your payments because of an illness or financial hardship.

Interest will still accrue while your loan is in deferment or forbearance and it will be capitalized, or added to your balance, when your loan goes back into repayment. To avoid capitalization, which will increase the total amount you owe, pay off the accrued interest before your deferment or forbearance period ends.

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Do you qualify?

 Minimum qualificationsThe typical borrower
Credit score640748

If you don’t meet the credit score qualification, you can apply with a co-signer who does. About 40% of borrowers who apply for a Sallie Mae private loan get approved, and of those borrowers 90% have a co-signer, according to a 2016 presentation by the company.

Repayment options

Like many private lenders, Sallie Mae offers three options for making loan payments while you’re in school: you can make interest-only payments, pay a flat $25 a month, or defer your payments until six months after you leave school. The interest-only payment option comes with the lowest interest rate.

In all three cases, interest will accrue while you’re in school and be capitalized at the end of your grace period if you don’t pay it off before then.

Where Sallie Mae shines

Flexible repayment option: Sallie Mae gives you the option to make interest-only payments, instead of paying interest and principal, for the first 12 months after your grace period. The company calls this option “graduated repayment,” but note that it is completely different from the graduated repayment plan available for federal student loans. Sallie Mae’s graduated repayment option will increase the total amount you’ll pay throughout the life of the loan, but it could be a good option for recent grads who need to ease into making student loan payments.

Co-signer release after 12 months: You can qualify to release your co-signer from your Sallie Mae loan if you’ve graduated, your credit is strong, and you’ve made on-time payments for 12 months. This can come in handy if you have a co-signer who doesn’t want to remain on the hook for your loan. To qualify for a co-signer release, your loan can’t have been in deferment or forbearance, and you can’t have been on Sallie Mae’s graduated repayment plan. While some other private lenders also offer a co-signer release option, many only offer it after 24, 36 or 48 months of on-time payments.

Unique loan offerings: In addition to student loans for undergraduates, graduate students and parents, Sallie Mae offers loans for education-related expenses that many student loans don’t cover. You can borrow to pay for a career training program, the bar exam, or medical or dental residency costs, or to pay for your kid’s private elementary, middle or high school. However, loans for these purposes all have variable interest rates, which means they’re subject to change monthly as the economy changes.

Where Sallie Mae falls short

Parent loans have higher interest rates: Sallie Mae rolled out its parent loan in April 2016, allowing parents, guardians, spouses, or other family members to borrow on behalf of a student. But Sallie Mae’s parent loans have higher rates than its loans for undergraduate and graduate students. Annual percentage rates for Sallie Mae parent loans with variable rates range from 4.0% to 10.37%, and APRs for parent loans with fixed rates range from 5.74% to 12.87%.

Sallie Mae loan typeVariable rate APRFixed rate APR
Undergraduate students2.50% to 9.59%5.74% to 11.85%
Graduate students2.50% to 7.51%5.74% to 8.56%
Parents4.0% to 10.37%5.74% to 12.87%

Depending on your credit, you could get a lower rate borrowing a federal parent PLUS loan, which has a fixed interest rate of 6.31% for the 2016-17 school year, plus an origination fee of around 4%. You could also potentially get a better deal with another private lender. SoFi, for example, prices its parent loans at 2.9% to 6.07% APR for variable rates and 4.25% to 7.75% APR for fixed rates.

Fewer protections than federal student loans: Private student loans have fewer borrower protections and are often more expensive than federal student loans. While Sallie Mae has a graduated repayment option, it’s only an option in the first 12 months you’re in repayment. After that, there aren’t clear options for borrowers who need a lower payment. With federal student loans you have the option to switch to an income-driven repayment plan, which allows you to cap your loan payments at 10% to 20% of your income.

Next steps

If you’re ready to borrow from Sallie Mae, you can apply directly on its website. It’s generally a good idea to compare multiple private student loan options before choosing a lender to ensure you get the best rate you qualify for.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @teddynykiel.