Students looking for loans outside of the federal government may be pleased to hear Sallie Mae will be lowering its interest rates on one of its student loans.
Sallie Mae announced in a statement Tuesday its interest rate for the Smart Option Student Loan will be lowered to the range between 2.88 and 10.25 percent.
According to the statement, Sallie Mae will also be implementing a policy that would release cosigners earlier. Students who make timely payments on their loans may register to be the sole signer on the loan 12 months after they graduate.
Another new feature Sallie Mae will offer students for the next academic year is the Smart Option Student Loan rewards program, which allows students to earn back the 2 percent of the interest payments they must make during their time at school if they make their payments on time, according to the statement.
Even with the lowered interest rates as a new incentive to borrow privately, University of Wisconsin Associate Director of Financial Aid Michelle Curtis said there are some benefits with federal loans that private lenders cannot compete with.
She also said even with lower interest rates, there are still risks with the private loans, and they do not come with the protection measures federal loans do.
There are some forgiveness features — such as loan forgiveness in case of death — and income-based repayments, which help students who do not make a lot of money right out of college to make smaller payments on their loans.
Federal loans also do not require cosigners, Curtis said.
According to the statement, while some private loan companies do not forgive loans upon the death of the borrower, Sallie Mae does.
The statement also encourages students to supplement financing their college education with private loans while exploring public options.
“There’s a lot of reasons people would use [federal loans],” Curtis said.
The statement claims Sallie Mae is the leading private lender in the country and has helped finance higher education for 31 million people.
