At a time when student loan debt is steadily on the rise, it’s nice to know that Sallie Mae is giving its borrowers a break, even if it is a small one.
Sallie Mae is decreasing its rates to 9.875 percent plus LIBOR, the rate of interest that banks can charge each other when competing for loans, in hopes of generating more business. After LIBOR, the change is merely a .5 percent rate reduction. Consumer analysts say it is unlikely that the new rate will bring in more borrowers.
Sallie Mae’s private loans, which carry higher interest rates than subsidized federal loans, are considered a last resort after scholarships, grants and government-backed loans. “This private student loan company is cutting interest rates to help bridge the gap when students and their families use up all other financial aid resources,” said Sallie Mae executive Charlie Rocha.
Rates for students vary and are based on the borrower’s credit history. Students can opt to make $25 payments once a month to help cover the cost of interest, or they can choose to defer their loans, which charges the most interest.
In addition to lowering their rates, Sallie Mae is also offering free tuition insurance. Borrowers who take out loans between July 1 and Oct. 1 will receive the insurance for one year. It covers up to $5,000 towards tuition, room, board and other student fees.
I personally think it’s great that Sallie Mae is offering such perks, even though, when it is all said and done, federal loans are still the way to go. Though the lending company’s incentives are small, I think Sallie Mae is headed in the right direction.
Via The Boston Globe