Sallie Mae trots out early-repayment loan
Students borrowing for college can save money and pay off debt faster under a new loan program.
But there's a catch: They start making payments while in college.
The Smart Option Student Loan Program, which Sallie Mae debuted Monday, allows typical borrowers to pay off the balance of the private loan nine years sooner and save an estimated 40 percent over the life of the loan. That could be about $8,700, compared with other private student loans, for a freshman borrowing the average loan amount of $7,700.
"It is our experience that today's students are financially savvy and families are looking for responsible, affordable options to help them pay for college, so we think families will see this loan as the smart option," Sallie Mae spokeswoman Patricia Nash Christel said in an e-mail.
Sallie Mae is the nation's biggest provider of college savings programs. It manages $180 billion in education loans serving 10 million students and parent customers.
This program replaces Sallie Mae's Signature private loans. The first money from the program will be disbursed June 1, but Sallie Mae recommends students first exhaust all the federal loan money they can get.
In that case, the Smart Loan is a good option, argues Mark Kantrowitz, publisher of FinAid.org, a Web site on financial aid.
Kantrowitz, 41, of Cranberry estimates students who borrow $8,000 from this program would pay $60 to $70 a month in interest while in college.
"That's doable," he said. "That's the cost of three DVDs ... a month."
Duquesne University junior Claire Cosgriff, 20, of Buffalo said the program is a good option for some students, but not her.
"With my schedule and my major, I can't work that often," said Cosgriff, an elementary education major who owes about $10,000 in federal student loans that she will not have to repay until after graduation. "It's not in my budget. The money I do make is for my living expenses."
Stephanie Hendershot, director of financial aid at Robert Morris University, said the Smart Option program might appeal to parents who want the loan in their children's names while they help with payments.
"For students doing it on their own, it probably wouldn't be a good option," she said, doubting they would have money to make payments while in school.
The repayment term for Smart Option loans ranges from five to 15 years. Other private loans could be repaid over 30 years. The adjustable interest rate is tied to an international benchmark.
Kantrowitz warns against "negative amortization," taking deferments and allowing the interest to balloon over 20 to 30 years.
"The students will be repaying their debt when their children are in school," he said.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pirates sign free agent 1B-OF Goebbert, RHP Webster
- Penguins’ Perron returning to form
- Committee says Senate should move forward on removing Attorney General Kane
- Steelers notebook: Tomlin not grooming successor to RB Williams
- Obama: No credible intelligence about terror plot against US
- Steelers kicker Boswell puts best foot forward
- Police find marijuana grow rooms in Castle Shannon
- Stanley’s Bar & Grill in Ford City offers free Thanksgiving dinner
- Cheswick super fan, 90, has had season tickets for almost 70 years
- Buffalo man dies after truck hits him in the West End Circle
- For some, pathway to Thanksgiving often bumpy