Sallie Mae Private Student Loan Review
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice, and in 2017 he received the SABEW Best in Business Award.
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Sallie Mae started out as a government-sponsored lender but became a private company in 2004. Today, Sallie Mae’s primary business is originating private student loans. Sallie Mae has a wide variety of private student loan products, so in this review we’ll take a look at what’s available, as well as the pros and cons of Sallie Mae’s loans.
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Rates & Terms:
Fixed Rates: 5.49 - 11.85%
Variable Rates: 4.37 - 11.47%
Terms: 5,15 years
There’s a lot to like about Sallie Mae’s private student loans, and here are the most significant positive features prospective borrowers should know about:
- Reasonable interest rates -- Sallie Mae’s APRs vary depending on your degree program, however, their rates are competitive compared to other online competitors.
- No origination fee -- Sallie Mae charges no origination fee, nor is there a prepayment penalty for paying your balance off early.
- High limits -- Higher borrowing limits are the key advantage of private student loans, and Sallie Mae allows borrowers to obtain loans for as much as 100% of their school’s total cost of attendance.
- Repayment flexibility -- Sallie Mae offers several features designed to increase repayment flexibility, such as a six-month grace period after graduation, the option to make 12 interest-only payments after the grace period, and more.
- Cosigner not required -- Most borrowers will need a cosigner (84% of Sallie Mae’s borrowers have one), but Sallie Mae allows creditworthy borrowers to apply on their own qualifications, unlike some other private lenders.
- Three in-school options -- Borrowers can choose to make no payments while in school, a $25 monthly payment while in school (and in the grace period), or interest-only payments during school. Borrowers who choose the latter two plans receive interest rate discounts on graduate school loans.
- Specialized products -- In addition to its undergraduate and graduate school loans, Sallie Mae offers specialized student loan products for MBA programs, medical and dental school, law school, and more. They also offer career training loans, loans for parents, and even loans to help parents pay for K-12 education.
Some of Sallie Mae’s specialized loan products offer their own unique features. For example, Sallie Mae’s medical school loan gives borrowers a 36-month grace period after graduation and the option to defer payments for 48 months during a residency and fellowship.
- Autopay discount -- Borrowers get a 0.25% interest rate reduction for making automatic payments from a bank account.
- Free FICO® Scores -- Sallie Mae offers its customers free access to their FICO® Score, updated quarterly.
What could be improved
There’s no such thing as a perfect lender, and Sallie Mae is certainly not an exception. With that in mind, here are a couple of things some of Sallie Mae’s competitors do better:
- Soft credit check -- Some other lenders allow you (and your cosigner) to pre-qualify for a certain APR and loan terms without a hard credit pull, but Sallie Mae does not.
- Few term lengths -- Sallie Mae only offers five- and 15-year repayment terms. Some other private lenders offer more choices when it comes to term length.
Obviously, you need to be enrolled in an educational program that matches the loan type. For example, in order to obtain a Sallie Mae undergraduate loan, you need to be enrolled in an undergraduate degree program, at least on a half-time basis.
In addition, because Sallie Mae’s student loans are private, strong credit (or a cosigner with strong credit) is a key requirement.
Who they offer loans to:
Sallie Mae offers a ton of specialized loan products. In addition to its undergraduate and graduate loans, it offers the following specialized loan types:
- Career training -- For students attending culinary or technical school, or another non-degree program.
- Parent loans -- For parents who want to be legally responsible for the loans for their child’s education.
- K-12 loans -- For parents who want to finance their child’s K-12 private school education.
- Medical school loans
- MBA loans
- Medical residency loans
- Dental school loans
- Law school loans
- Health professional graduate loans -- For students in programs like nursing graduate school and pharmacy school.
Who Sallie Mae’s loans are right for:
Generally speaking, private student loans are best used as a way to close the funding gap between the other student aid you receive and the total cost of attendance. Obviously, grants and scholarships should be taken advantage of first, and federal loans are a better choice than private loans to the extent that they’re available.
Unfortunately, federal student loans have relatively low borrowing limits, especially for undergraduates in their first couple years of enrollment. On the other hand, private student lenders will generally allow you to borrow up to and including your school’s entire cost of attendance.
How to apply
Sallie Mae’s application process is relatively quick and straightforward. While filling out the application, you’ll need personal information, information about the school you’re attending, and how much you need to borrow. According to Sallie Mae, it should only take you about 15 minutes to fill out the application and find out if you’re approved or not.
Once your application is approved, you’ll need to pick your payment options as well as whether you want a fixed or variable interest rate. Then you’ll need to sign your loan documents, and you’re all done -- Sallie Mae will send your loan proceeds directly to your school.
Alternatives to consider
It’s important to mention that if you qualify for federal student loans, it’s generally a good idea to use them first before considering a private student loan. Simply put, federal student loans have so many unique advantages over private loans.
Just to name a few federal student loan benefits:
- Since they are guaranteed by the government, federal student loans require no credit check or income requirements, nor do they require a cosigner.
- Some federal loans might be subsidized for undergraduate students, meaning that the federal government pays the interest on the loans while you’re in school and during qualified deferments.
- Federal loans may qualify for forgiveness programs such as Public Service Loan Forgiveness (PSLF), but private loans never do.
- Federal loans are eligible for income-driven repayment plans, such as Pay As You Earn (PAYE). These limit your monthly student loan payments to a certain percentage of your disposable income.
The point is that federal student loans are probably a better way to finance your education. Private student loans are a good choice if and only if your federal student loans aren’t enough to pay for your cost of attendance.
If you need to take out a private student loan, it’s a good idea to shop around. Different lenders have different benefits, APRs, and term lengths, so be sure to look into some of the best student loan lenders before making a decision.
Sallie Mae is right for you if:
Sallie Mae is a great option if you are looking to cover the gap between what federal loans will cover and what you actually need to attend your program. They offer a larger variety of private student loans than most lenders in that they offer loans for MBA, law, or medical programs. If you're looking for private loans to help you with an advanced, specialized program, Sallie Mae is a great place to start.