Top lender modifies student loan deals
Tweet
Racking up student loans and paying them off for decades will no longer be a reality for students taking loans from the nation’s largest private student lender.
Starting in 2009-10, Sallie Mae will scale back the amount of time students have to pay back loans to five to 15 years, from 15-30 years. The lender also will require students to make interest payments while still in school.
Sallie Mae representatives said although students will have less time to repay loans, paying off some interest while still in school will prevent monthly bills from rising dramatically after graduation.
Telecommunication, information studies and media sophomore Kyle Gee, who has a private loan from Citibank, said he would try to secure loans elsewhere if other private lending companies followed Sallie Mae.
“That’s the reason you’re taking out loans,” he said. “You can pay them back when you’re graduated with a job and have more money.”
During the 2007-08 school year, 3,178 MSU students used private loans, said Val Meyers, an MSU associate director of financial aid. About 26,000 students receive financial aid, but most of them apply for federal loans, she said.
“The private loans are less desirable because the federal loans don’t require you to have credit background if you’re a borrower,” Meyers said. “The interest rate on federal loans is a fixed rate and is set by the government.”
David Schweikhardt, a professor from the Department of Agricultural, Food and Resource Economics, said Sallie Mae may have changed its policy to attract more private investors who supply lenders with funding in the form of bonds.
“Anything you can do to assure those bond buyers that the person borrowing the money is a good credit risk is basically coming into play, given where the credit markets are right now,” Schweikhardt said.
Under the new requirements, if a student was to borrow $17,000 over two years, they would be required to pay $40 per month the first semester. The amount would increase each semester, reaching $160 per month by the end of the second year.
The $160 monthly payment would stay constant until the student graduated, when they would be left to pay the original loan amount of $17,000. Under the previous system, interest would have accumulated while the student was in school and been added to the original loan amount.
“Forty dollars a month is easy to do,” Gee said. “But … it would be a little scary to see how much it could increase.”
The Associated Press contributed to this report.
Commentary
Add your $0.02, go to the comment form or follow the comment feed
Mike
(03/26/09 1:07am)Report
Haha, this is golden stuff.
If you have EVER dealt with Sallie Mae, you would be laughing about this too.
When you are going through college, you are sweating away on studies and working what hours you can to pay for living. Student loans help cover the gap.
That $40 a month is not real, it doesn’t even cover interest. It doesn’t even cover the fees they charge to process a payment. The rate is variable too. That means that as they slowly destroy your credit… which they will do and then blame you for it… they will charge you more and more to keep up. Better yet, is that money you were earning to live on while in school? That’s gone now, just send it to Aunt Mae.
The result of this is students will be forced to borrow more to sustain themselves AND make the payments while working at the same time. It’s BS and tripe… and the way they are spinning this PR-wise is disgusting.
Sorry Mike
(03/26/09 7:09am)Report
Mike I hope that you and other students can find another means of getting student aid. This is unfair what Sallie May is doing. Students have enough on their plates, you shouldn’t have to worry about paying your student loans back while still in school, rediculous!
Financial Aid
(03/26/09 10:34am)Report
Students still have a number of options outside of what SallieMae is offering. To compare a variety of other options, check out Simply Tuition or www.privatestudentloans.com/compare and you will find a number of programs. Students should also consider the PLUS and Grad PLUS loans which allow for deferment. The PLUS Loan is in the parents name – not the students…
Student
(03/26/09 11:15am)Report
Yes, us students have a lot on our plates, we all know college is not cheap. For some of us parents pay for colleges for others we rely on the government for loans. Then there are those of us that are responsible, we work while in school and create our own credit.
If you want to know who i am, im a freshman who will be paying for my entire college education out of my pocket with loans and such. Its not a bad idea to pay some on your loans so you dont have 50k to try to deal with along with all the other stuff with getting a new job and most likely it being out of state.
Im not going to continue my rant, but the point is students need to take the initiative and responsibility that comes with college, your parents are not made of money.
Karissa
(03/31/09 4:21pm)Report
Sallie Mae owns me! I made my payments,lost my job,was able to get forbearance thinking it would show good faith…not even close! They can just bury me in a Sallie Mae coffin!