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Banking

What Is a Payroll Card?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Who doesn’t like payday? Your employer hands over your wages in the form of a paycheck or directly deposits funds right into your bank account. For more and more workers, however, payday means getting money on a payroll card. Payroll cards are a type of prepaid debit card provided by employers in lieu of a paycheck or a direct deposit.

According to a 2017 report from the Aite Group, a research and advisory firm, an estimated 6.4 million payroll cards will be in use by the end of 2019. The Aite Group estimates that number will increase to 8.4 million by the end of 2022.

Below, we’ll discuss how payroll cards work, identify a few things to watch out for, and answer some frequently asked questions.

How do payroll cards work?

Employees use payroll cards to withdraw their earnings at ATMs and make purchases anywhere that the card network — e.g. Visa or Mastercard — is accepted. Some cards even offer the option to sign up for online bill payments. But employees who are offered these cards may face an array of fees to access their pay, plus other potential pitfalls.

For employers, printing and sending checks can be expensive and cumbersome. Direct deposits are one way for an employer to avoid the costs associated with physical paychecks, but it’s not a viable option for employees who lack bank accounts.

A 2017 survey from the Federal Deposit Insurance Corporation (FDIC) found that approximately 8.4 million households don’t have a bank account at an FDIC-backed institution.

“There are lots of people who are unbanked or underbanked but still have jobs,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. “If they get a paper check, they have to go to a check-cashing company that is likely to charge a very high fee.”

Payroll cards can be a great way for employers to pay unbanked or underbanked employees, giving them access to their money without the expense of visiting a check cashing firm. However, these cards are not always free of fees and complications.

What are the problems with payroll cards?

Before you agree to sign up for a payroll card, make sure you read the terms and conditions closely and understand how the card works, what fees you’ll have to pay and which usage-based fees may apply. Benefits, drawbacks and fees can vary depending on the card provider. Here are a few things to look out for:

There may be fees to access your pay

New consumer protections and disclosures for prepaid cards and payroll cards went into effect on April 1, 2019. The rules include a requirement to provide a clear chart of common fees to users before they sign up for a card. This should give users a clear, simple fee chart to help them comparison shop and understand what fees they may face when using their payroll card.

Taking the E1 Visa® Payroll Card as an example, here are some of the fees that payroll cards might charge:

E1 Visa® Payroll Card Fees

Monthly Maintenance Fee:

$2.95 in months when there is no payroll deposit on the card; no fee in a month when there is a payroll deposit.

ATM Cash Withdrawal MoneyPass Network Fee:

$1.50; Users get one no-charge withdrawal transaction per month

ATM Cash Withdrawal Non-MoneyPass Network Fee:

$2.50

ATM Cash Withdrawal Foreign Fee:

$3.50

ATM Balance Inquiry Fee:

$0.50

ATM Decline Domestic Fee:

$0.50

ATM Decline Foreign Fee:

$3.00

Funds Transfer Fee:

$2.00

Paper Statement Fee:

$2.00 (per monthly paper statement requested)

Lost/Stolen Card Replacement Fee:

$10.00

Express Delivery Fee:

$40.00

Account Closure Fee:

$15.00

Currency Conversion Fee

3% per transaction

Source: E1 Visa® Payroll Card

Looking more closely at this fee schedule, it’s clear you can avoid some of the fees by being conscious of how you use the card. The monthly maintenance fee is waived in months when there are deposits on the card from your employer(s), and you get one free ATM withdrawal per month. However, besides the single free ATM withdrawal, it’s difficult to avoid paying fees to access your money, and the account closure fee is high and unavoidable.

Not all cards offer the same features

The payroll card your employer offers may not be a great fit with your financial habits or your normal routine. For example, these cards may be part of large ATM networks and may offer free withdrawals from in-network ATMs. However, like with the E1 Visa card above, there may still be a charge for in-network withdrawals. If there aren’t in-network ATMs nearby, you could wind up regularly paying higher out-of-network withdrawal fees.

Some cards offer additional ways to access your money without fees, such as getting cash back when you make a purchase or offering paper checks that are tied to the account.

Another potential drawback is that these accounts may limit how much money you can keep in the account, and how much you can withdraw or transfer each day.

Holds may be placed on your account for certain purchases

Certain transaction types can trigger a payment hold could be put on funds in your account when you’re using your card for purchases. For example, if you use the card at a gas station, additional funds in your account might be put on hold and it could take several days for the transaction to finalize and the funds to be released. This could mean an extra $100 that’s in your account won’t be available for the following week.

It’s not a stepping stone toward a checking or savings account

“In some ways, [a payroll card] could be working to the detriment of some employees because it’s keeping them from seriously considering opening a checking account at a bank or credit union,” says McClary. “The money isn’t working for you.”

Conventional checking accounts lack many of the small fees that can make a payroll card a bad deal. Additionally, conventional banking options include savings accounts with higher interest rates.

If you need to use this type of card, you may have trouble opening a checking or savings account due to a negative bad banking history — perhaps you bounced a few checks or closed an account that had a negative balance. Remember, many financial institutions offer second chance bank accounts, so don’t let a bad payroll card deal prevent you from pursuing a regular banking account. McClary adds that, “there are programs available in every state to help people open a checking or savings account.”

Pros and cons of payroll cards

Pros

  • Quickly and electronically receive your pay, avoid check-cashing fees and keep your money in a secure account rather than having to worry about carrying cash.
  • Many cards offer free bill pay services, which can make it easier and cheaper to pay your bills versus using money orders or cashiers’ checks.
  • You can manage your money online or with a mobile app (if the card company offers one).

Cons

  • Payroll cards charge fees that can be difficult or impossible to avoid.
  • Very often you have no choice over which payroll card the company will offer.
  • The card might have a maximum daily withdrawal or transfer limits.
  • You won’t earn interest on your money and it may be more tempting to spend money when you don’t separate your savings.

FAQ on payroll cards

State laws may require your employer to give you free access to some or all of your wages at least once each pay period if you use a payroll card. Depending on where you live and the program, your card could waive the first ATM-transaction fee or give you an alternative way to access your wages for free, such as a check that’s linked to the account.

No, you do not. Employers must give you at least one alternative to using a payroll card. However, this alternative could be a direct deposit (rather than a paper check), which isn’t especially helpful for unbanked employees.

If you don’t like the company’s card offering and don’t want or can’t get a bank account, you could sign up for an alternative prepaid debit card on your own — check out our top picks. You may then be able to sign up to have your pay directly deposited onto the card you chose rather than one your employer picked.

Some cards may offer this feature, but others do not. Review the terms of your employer’s program to see if this is an option.

Some cards will let you get cash back when making a purchase, which could be a convenient and free way to get cash from your account.

There’s no credit check or requirement to get or use a payroll card.

Some cards come with zero liability coverage from the card networks, like Visa or Mastercard. Even without that level of protection, you’ll have the same protections as you would with a debit card. You won’t be liable for any transactions after you report your card lost or stolen and you’re limited to $50 of liability for charges that already occurred if you report the card lost or stolen within 48 hours.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at [email protected]

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Banking Apps

These 8 Apps Can Help You Make It to Your Next Payday

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

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Financial emergencies have a habit of cropping up at the worst possible time — when you’re stuck in-between paychecks. Perhaps you need $250 for an emergency car repair, but you just paid your rent and won’t have the funds until your next payday in two weeks. You might want to turn to a credit card or a payday loan, but those could rack up onerous fees.

What if you could get a portion of your next paycheck early without paying hefty fees or interest? Several financial services companies make this a reality by helping workers make ends meet without taking on debt. Others offer short-term, interest-free loans based on a flat membership fee, which may be easier to manage and budget for than using a credit card or paying financing fees to take out and repay a loan.

1. Earnin

  • Available if you are paid via direct deposits into a checking account from an Earnin-supported bank
  • Withdraw up to $100 early per pay period, or up to $500 after continued use of the app
  • No fees or interest — Earnin makes money from voluntary tips

Earnin is an app-based service available on Android and iPhone smartphones. Once you download the app and create an account, you can connect your bank account (if Earnin supports your bank) and verify your paycheck schedule. You must have direct deposit set up and linked to a checking account.

How it works: In order to use Earnin, you need to upload your timesheet, either manually, by connecting a time-tracking account to the app or by using the Earnin app’s GPS feature if you have a single workspace. Using this information, Earnin estimates your average take-home hourly rate after taxes and deductions.

Earnin keeps track of the money you earn while you work, and you can withdraw a portion of your unpaid wages before your next payday. At the start, you may only be able to withdraw up to $100 each pay period. But based on your account balances and use, the pay-period maximum could potentially increase up to $500. The payment will arrive in your checking account within one business day, or even a few seconds, depending on where you bank.

Earnin doesn’t connect to your employer’s payroll. It connects to whatever bank account you use to collect your pay. The next time your paycheck hits your bank account, Earnin will automatically withdraw what you owe. There aren’t any fees or interest charges for using the service; however, Earnin does ask for support in the form of tips.

2. Branch

  • Available if you are paid via direct deposits into a checking account
  • Withdraw up to $500 in earned wages per pay period
  • No fee for standard (three-day) withdrawals, but $3.99 per instant withdrawals

Branch gives you access to money that you’ve earned already, but wouldn’t otherwise receive until your next payday. The company also offers more features if multiple employees at the same company use the app, or if your employer signs up. For example, employees can check their shifts using the app and make a request to swap shifts, ask for coverage or quickly pick up someone else’s shift.

How it works: To use the early pay feature, you’ll need to connect a checking account and debit card, and receive direct deposits into the connected account. You can request an advance of up to $500 using the app — the money will be deposited into your account, and then paid back with an automatic withdrawal on your next payday.

You’ll also need to upload images of your work schedule. However, if your employer has also signed up for Branch and you manage your shifts using the app, your schedule may automatically be in the system.

The early payments can take several days, although you may be eligible for same-day payments based on your direct deposit history and whether you generally have money leftover after your paydays or receiving an advance.

A standard withdrawal into your bank account is free and could take up to three days. There is a $3.99 fee if you want to request an instant payment.

3. Dave

  • Available if you’re employed, paid via direct deposit and have a checking account
  • Borrow up to $75 with an interest-free, short-term loan
  • $1 monthly membership fee and a small fee for expedited delivery. Dave also accepts tips

Dave is a membership service that connects to your bank account and will text you if you’re in danger of overdrafting. The service costs $1 per month. Qualified members can borrow up to $75 with an interest-free loan that helps them cover expenses until their next payday.

How it works: Once you’re a member, you’ll need to get approved before you can request an advance. To do this, you’ll need to connect a checking account where your paychecks are directly deposited and have an account history with several consistent paychecks. Your approval may also depend on whether Dave determines whether you’ll have enough money to repay the loan — so if you generally get paid and spend all your money the next day, you might not get approved.

Once you’re able to request a loan, you may be able to borrow up to $75 without paying any interest or fees. The loan can take up to three business days to reach your account. There is also an express funding option which will get the money deposited within eight hours for a “small fee” (though Dave doesn’t specify how much that is in the FAQ). You can also choose to give a tip when you take out an advance, but tipping is optional.

The due date may be your next payday, but some smaller advances will have a due date on the next Friday even if that’s before your next payday. You can repay the loan automatically from your connected checking account, or repay part or all of the advance early if you want.

4. MoneyLion

  • A personal finance platform
  • Borrow up to $250 with an interest-free, short-term loan
  • Free membership option. $29 monthly fee for extra features, but the fee can be offset

MoneyLion is an personal finance platform. Members receive a checking account, investment account and access to free cash advances. You can use the cash advance to help cover expenses until your next payday.

How it works: The basic MoneyLion membership is free, but there’s also a Plus membership available for a $29 monthly fee. However, you can earn $1 cash back by logging into the app each day and swiping through the daily cards, which have advice, tips and alerts. As a result, you can get the Plus membership essentially for free if you’re a daily user.

The free membership allows you to request up to $250 with a 0% APR cash advance. The money will appear in your MoneyLion account in seconds and will be repaid on your next payday.

To qualify for the cash advance, you’ll need to have your paychecks of at least $250 directly deposited into your MoneyLion account. Your cash advance limit will be 10 percent of your direct deposit amount. For example, you’ll need to have at least $2,500 directly deposited each pay period to qualify for the full $250 cash advance.

Plus members have another funding option, a personal loan for up to $500 that’s repaid over 12 months. However, the loan has a 5.99% APR.

5. Brigit

  • Available if you have direct deposit with average amounts over $400
  • Borrow $80 to $250 with an interest-free, short-term loan
  • $9.99 monthly membership fee, which includes free instant transfers

Brigit is another service that connects to your bank account and allows you to take out interest-free loans between paychecks. The amount you can borrow is based on your bank account activity rather than your work schedule.

How it works: You’ll need to connect a checking account that’s been active for at least 60 days, has a positive balance and has at least three recurring direct deposits from the same employer. Brigit says it looks for direct deposits of more than $400 per paycheck and $1,500 per month on average. You’ll also need to have a history of maintaining a positive balance the day of (and day after) your payday.

Once you’re set up, you can request an advance on your next paycheck. The amount will depend on your checking account’s history and can vary from $80 to $250. You can receive one advance at a time, which will automatically be repaid from your bank account on your next payday. However, you are also able to repay the advance early.

There’s a $9.99 monthly membership fee for Brigit, which includes access to the loan along with other features. For example, you can allow Brigit to monitor your account and automatically transfer a loan to help you avoid overdrafting or paying a late fee. Brigit also offers free extensions if you have trouble repaying the loan, and doesn’t charge late fees, instant transfer fees or ask for tips.

6. DailyPay

  • Employer must sign up and offer DailyPay as a benefit
  • Get paid early for the work you’ve done
  • Pay $1.25 or $2.99 per transfer, but employers can choose to cover the expense

DailyPay connects with employers’ payroll systems to give employees early access to money they’ve already earned. Your employer will need to sign up with DailyPay before you can use the service. It’s free for employers and works as an add-on to ADP payroll systems.

How it works: Once your employer signs up, you can create your DailyPay account. As you work, you’ll accrue an “available balance” each workday based on the hours you’ve worked. You can then transfer money that you’ve earned to your bank account, prepaid debit card or a payroll card.

DailyPay charges a fee of $1.25 for every transfer that you make, with the funds being delivered the next business day. If you need your money before tomorrow, you can do an instant transfer that has a fee of $2.99. Employers can choose to pay for part or all of the fee.

7. PayActiv

  • Employer must sign up and offer PayActiv as a benefit
  • You can withdraw the greater of $500 or up to 50% of your earned wages
  • Fees range from $0 to $5 per withdrawal based on your employer

PayActiv is an employer-sponsored program that allows employees to withdraw a portion of their earned wages before payday. While you can’t sign up on your own, you can ask PayActiv to contact your employer about offering the service. There’s no setup or operating costs for employers.

How it works: Once your employer offers PayActiv, you sign up for an account online, with the app, via text or by calling the company. After creating your account, you can start withdrawing money as soon as you earn it rather than waiting for your payday.

You can withdraw up to 50% of your earned income (up to $500 max) during each pay period via an electronic transfer or withdrawal from select ATMs. The amount you withdraw will be deducted from your next paycheck.

The early payment comes from PayActiv, but it isn’t a loan and you won’t need to pay interest. Instead, your employer will automatically send PayActiv an equivalent amount of money from your next paycheck. PayActiv charges a $5 fee for each withdrawal, but some employers choose to cover part or all of the expenses.

PayActiv also offers a prepaid card where you can have earned wages deposited each day. It’s free to get the card and there’s no fee if you don’t use it. However, there’s a flat weekly $3 fee (if you’re paid weekly) or bi-weekly $5 fee (if you’re paid bi-weekly) during any period when you do use your card.

8. FlexWage

  • Employer must sign up and offer FlexWage as a benefit
  • You’ll receive a reloadable card tied where you can add earned pay to your account before payday
  • Fees vary depending on your employer

FlexWage is another employer-sponsored program that can give employees early access to money they’ve earned. As you work, your earned income accrues and you can then transfer money to a prepaid card.

How it works: With FlexWage, the employer determines how often you can make early withdrawals and the maximum amount you can withdraw. The money will be transferred to a prepaid card and then deducted from your next paycheck. You may have to pay a fee, but it will depend on your employer; FlexWage does not list a potential fee range on its website.

FlexWage also has a special program for restaurants that allows a restaurant to give employees access to their tips, bonuses or commissions at the end of each day. The money can either be added to a prepaid card or transferred to a bank account.

Need more money? You may consider a personal loan

While a cash advance or getting early access to your wages can help when you are in a small pinch, they often cannot cover a larger emergency expense. If you need more money, you might want to take out a personal loan.

Personal loans are often unsecured loans, meaning you’ll qualify based on your creditworthiness. You’ll receive the money, which can sometimes be deposited directly into your bank account the same day that you apply, and then repay the loan over a predetermined period of time. Many personal loans have a fixed interest rate, and you can know exactly how much your monthly payments will be and how much you’ll pay overall before accepting a loan offer.

The downside is that you may wind up paying fees to take out the loan and a lot of interest, especially if you take out a large loan and then spend several years repaying it.

However, if you have poor or no credit, watch out for online lenders that offer high-rate installment loans. These can seem like good options when the monthly payments are affordable, but the fees and interest can result in repaying several times as much as you borrow. You can explore bad credit loan options here.

Company
APR
Terms
Credit Req.
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7.99%-35.89%

36 or 60

months

620

SEE OFFERS Secured

on LendingTree’s secure website

The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early.

6.95%-35.89%

36 or 60

months

600

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on LendingTree’s secure website

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3.99%-16.99%

24 to 144

months

660

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Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

16.05%-35.99%

24 to 60

months

Varies

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Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). Larger loan amounts require a first lien on a motor vehicle no more than ten years old, that meets our value requirements, titled in your name with valid insurance. Maximum annual percentage rate (APR) is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. The lowest APR shown represents the 10% of loans with the most favorable APR. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan. OneMain loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z, such as college, university or vocational expenses; for any business or commercial purpose; to purchase securities; or for gambling or illegal purposes. Borrowers in these states are subject to these minimum loan sizes: Alabama: $2,100. California: $3,000. Georgia: Unless you are a present customer, $3,100 minimum loan amount. Ohio: $2,000. Virginia: $2,600.

Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $7,500. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.
SoFi

5.99%-16.79%

24 to 84

months

680

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Advertiser Disclosure.

Fixed rates from 5.990% APR to 16.240% APR (with AutoPay). Variable rates from 5.74% APR to 14.700% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.74% APR assumes current 1-month LIBOR rate of 2.43% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

All rates, terms, and figures are subject to change by the lender without notice. For the most up-to-date information, visit the lender's website directly. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.

See Consumer Licenses.

SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.

If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

The information in this article is accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at [email protected]

Advertiser Disclosure

College Students and Recent Grads, Reviews

Sallie Mae Student Loans Review for 2019

mortar board cash

Most students who borrow money for their education should start with federal student loans. The federal loan programs offer borrowers a variety of repayment, forgiveness, cancellation and discharge programs that aren’t available from private lenders.

But if you reach your federal loan limits, or examine your options and find you might be better off with a private student loan, you can compare loan offerings from private student lenders. One of the largest private student loan companies, Sallie Mae, has more than a dozen education loan products you can consider.

What is Sallie Mae?

Started nearly 50 years ago, Sallie Mae has played a variety of roles in the student loan space, including lending federally guaranteed loans and private student loans, and servicing federal and private loans.

Sallie Mae spun off a portion of its student loan servicing business to form a new company, Navient, in 2014. And due to changes in the federal student loan programs, Sallie Mae no longer originates federally guaranteed loans. Now, Sallie Mae only offers and services private student loans, while also offering other banking products, such as savings accounts.

Types of student loans Sallie Mae offers

Whether you’re a parent of a grade school student or about to begin your doctorate, Sallie Mae may have a student loan that fits your needs. Its loans are designed for undergraduate students, graduate students and parents or sponsors of students. It also has loans to cover medical residency or bar exam costs.

  1. K-12: For a parent or sponsor of a child who wants to take out a loan to pay for a student’s private kindergarten-through-high school education
  2. Parent: For a parent or sponsor of a child who wants to take out a loan to pay for an undergraduate, graduate or certificate program
  3. Career training: For students at eligible non-degree granting schools
  4. Undergraduate: For students at degree-granting schools who are earning an associate or bachelor’s degree
  5. Graduate: For students at degree-granting schools who are earning a master’s, doctorate or law degree
  6. MBA: For business school students
  7. Health professions graduate: For graduate health profession students, including those in allied health, nursing, pharmacy, and other graduate-level health degrees.
  8. Dental school: For graduate dental degree students, including those in dentistry, endodontics and orthodontics programs
  9. Medical school: For graduate medical degree students, including those in allopathic, osteopathic and podiatric programs
  10. Medical residency and relocation: For medical residency students to help pay for board examinations and residency-related travel and moving expenses
  11. Dental residency and relocation: For dental residency students to help pay for board examinations and residency-related travel and moving expenses
  12. Bar study: For law students and recent graduates to help pay for bar review courses, registration and living expenses while you study
  13. Law school: For students studying for their law degree

Sallie Mae student loans in a nutshell

Most of Sallie Mae’s loans are identical when it comes to fees, cosigner release options and discounts.

Fees

  • Aside from the K-12 loan’s 3% disbursement fee, none of the loans have application, origination, disbursement or prepayment fees.
  • Late payments result in a fee that’s 5% of the amount due (capped at $25).
  • Returned checks carry a $20 fee.

Cosigner release

  • You can apply to release a cosigner after making 12 consecutive, on-time, full interest and principal payments. However, parent loans don’t offer a cosigner release option.

Discounts

  • With all but the K-12 loans, you can receive a 0.25% interest rate discount if you sign up for automatic payments.
 K-12 loansParent loansCareer trainingUndergraduate loansGraduate loansMBA loans
Fixed APR range*Not available5.49% -
12.87%
Not available5.49% -
11.85%
5.50% -
10.23%
6.00% -
10.23%
Variable APR range*9.49% - 16.14%5.74% -
12.37%**
6.49% - 13.83%**4.23% -
11.35%**
4.50% -
10.11%**
4.50% -
10.11%**
Loan termsThree years10 yearsFive to 15 yearsFive to 15 yearsFive to 15 yearsFive to 15 years
Loan amount$1,000 minimum

Borrow up to the school-certified cost of tuition
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
Repayment plans (both in-school and post-school)Full interest and principal paymentsFull interest and principal payments

Interest-only payments
$25 a month

Interest-only payments


12-month interest-only repayment that begins after your separation or grace period ends
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends

**Variable rates are capped at 25%.

 Health professionsDental schoolMedical schoolMedical residencyDental residencyLaw school
Fixed APR range*6.25% - 10.23%6.00% - 9.99%5.99% -
9.98%
Not availableNot available6.00% -
9.99%
Variable APR range*4.50% - 10.11%**4.50% - 9.86%**4.50% -
9.86%**
5.21% - 11.67%5.21% - 11.67%4.50% -
9.86%
Loan termsFive to 15 years20 years20 yearsUp to 20 yearsUp to 20 yearsUp to 15 years
Loan amount$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to the school-certified cost of attendance
$1,000 minimum

Borrow up to $20,000
$1,000 minimum

Borrow up to $20,000
$1,000 minimum

Borrow up to the school-certified cost of attendance
Repayment plans (both in-school and post-school)Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends
Full interest and principal payments

Two- or four-year interest-only repayment
Full interest and principal payments

Two- or four-year interest-only repayment
Deferment

$25 a month

Interest-only payments

12-month interest-only repayment that begins after your separation or grace period ends

**Variable-rate loans have a 25% APR cap.

How Sallie Mae compares with other lenders

Sallie Mae finished first among MagnifyMoney’s top five private student lenders for 2019. We compared undergraduate student loan products and began with the nation’s 10 largest national lenders. The ranking focused on loans’ APR ranges, discounts, fees and repayment terms, as well as lenders’ policies for releasing a cosigner, deferring loan payments and their online applications.

In addition to having a top-rated undergraduate loan, Sallie Mae differentiates itself by offering its wide variety of different student loans. Many of these other loans share characteristics with the undergraduate loan, including the 12-payment cosigner release requirement, lack of a specific maximum loan amount and a 0.25% interest rate discount for auto debit.

However, as with any lender, there are pros and cons to consider before taking out a loan from Sallie Mae.

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Advantages of Sallie Mae Student Loans

You may be able to choose a repayment plan. Depending on the loan product, you may be able to choose from up to three different repayment plans. A plan that requires you make payments while you’re in school could help you save money in the long run; however, deferring your full payments can give you more money to cover education and living expenses now.

12-month payment requirement for cosigner release. With most Sallie Mae student loans, you can apply to release your cosigner once you make 12 consecutive, full, on-time payments. Other lenders may let you apply for cosigner release, but it could take longer to qualify, in some cases requiring 48 full monthly payments before you can apply.

In addition to the payments, you’ll need to pass a credit check and meet Sallie Mae’s requirements for releasing a cosigner.

Discharge due to death or permanent and total disability. Similar to the federal student loan guidelines, Sallie Mae will waive a borrower’s current balance if he or she dies or becomes permanently and totally disabled. The benefit may be especially important to borrowers who have a cosigner or dependents, such as a spouse or child(ren), who could be affected if the debt isn’t waived.

No preset loan limit. While some federal student loans and private student loans set dollar-amount limits on how much you can borrow, most Sallie Mae student loans allow you to borrow up to your school’s certified cost of attendance.

Loans for less-than-half-time students. Some private school lenders require borrowers to have at least a half-time course load to qualify for a student loan. Sallie Mae’s loans for students don’t have this requirement.

Forbearance and deferment options. Putting your loans into forbearance or deferment lets you temporarily stop making payments without getting charged late fees or hurting your credit. Forbearance is generally for when you have trouble making payments, perhaps due to losing a job or a medical emergency. Deferment, meanwhile, may apply to other circumstances, such as returning to school.

Sallie Mae could approve up to 12 months of forbearance in three-month increments and up to 60 months of deferment in 12-month increments. Interest continues to accumulate, and your long-term costs may increase, but forbearance or deferment are still better options than missing a payment or letting a loan go into default.

Extra perks. Many of Sallie Mae’s student loans also come with the Study Smarter benefit. With it, borrowers can get four months of free study tools or 30 minutes of live online tutoring through Chegg Tutors® or a combination of the two.

All of Sallie Mae’s loans also give borrowers and cosigners quarterly access to a FICO® credit score.

Drawbacks of Sallie Mae Student Loans

No additional interest rate discount. Sallie Mae’s 0.25% interest rate discount for auto debit is standard for most federal and private student loans. But other private lenders offer borrowers opportunities to get an additional 0.25% to 0.50% interest rate discount by having other financial products from the same lender or making auto debits from an account with the same lender.

Sallie Mae assigns loan terms. Many Sallie Mae student loans have a repayment term that ranges from five to 15 years. Most other lenders that offer a range of terms let borrowers choose their term, along with the corresponding monthly payment and interest rate. Sallie Mae, however, will assign you a term.

No loan pre-approval. Private student loans require a credit check. Some lenders will do a soft credit pull, which doesn’t hurt your score, to determine if you can qualify for a loan or need a cosigner and to show you estimated interest rates if you qualify. Sallie Mae will only show you rates after a hard credit inquiry, which could hurt your score slightly.

What it takes to qualify with Sallie Mae

All Sallie Mae student loans have the same basic requirements:

Minimum credit score: Sallie Mae doesn’t disclose a minimum credit score requirement. In 2016, applicants that were approved for a Sallie Mae student loan had, on average, a 748 FICO score at the time of approval.
Minimum age for borrowers: Borrowers must be the age of majority in their state (often 18 years old). Younger applicants will need an eligible and creditworthy cosigner.
State residency requirements: Sallie Mae student loans are available in every state.
Eligible schools: Sallie Mae doesn’t publish a list of eligible schools, but you can search for the name of a school at the beginning of the loan application to see if your school qualifies.

 K-12 loansParent loansCareer trainingUndergraduate loansGraduate loansMBA loans
Additional requirementsThe student you’re taking the loan out for has to be enrolled in a private school.The student you’re taking the loan out for has to be pursuing a certificate or an associate, bachelor’s or graduate degree at a degree-granting school.You must be enrolled at a non-degree-granting school and pursuing professional training or a certification.You must be a enrolled at a degree-granting school and pursuing a certification or an associate or bachelor’s degree.You must be enrolled at a degree-granting school and pursuing a master’s, doctorate or law degree.You must be enrolled at a degree-granting school and pursuing a masters of business administration degree.
 Health professionsDental schoolMedical schoolMedical residencyDental residencyBar studyLaw school
Additional requirementsYou must be enrolled at a degree-granting school and pursuing a degree in one of the eligible areas of study.You must be enrolled at a degree-granting school and pursuing a degree in one of the eligible areas of study.You must be enrolled at a degree-granting school and pursuing a degree in one of the eligible areas of study.You must either have a half-time course load and be in your last year at an eligible school, or graduated from an eligible school in the previous 12 months.

If you didn’t already earn your medical degree, you must expect to earn the degree in the current academic program year.
You must either have a half-time course load and be in your last year at an eligible school, or graduated from an eligible school in the previous 12 months.

If you didn’t already earn your dental degree, you must expect to earn the degree in the current academic program year.
You must either have a half-time course load and be in your last year at an eligible school, or graduated from an eligible school in the previous 12 months.

You must take the bar exam within 12 months of graduating.
You must be enrolled at a degree-granting school and pursuing a J.D. degree.

What borrower is Sallie Mae best for?

Sallie Mae offers a variety of student loan products that could be a good fit for parents or students. If you, or a student you’re supporting, can’t take out additional federal student loans but need more money for school, Sallie Mae’s lack of a predefined loan limit could make it a good option.

The medical and dental residency programs and the bar study loan do have a loan limit. But even then, it’s higher than the limit of some competitors who offer similar types of loans.

You also may want to consider Sallie Mae if you think you’ll need a cosigner and would like to release the cosigner later. Although you still may not qualify, depending on your creditworthiness, the 12 months of consecutive full payments is shorter than what some other lenders require.

Taking a closer look at the online platform

You can learn a lot of details about Sallie Mae’s student loans on its website. There are specific pages for each loan product that have a lot of the basic information you’ll want to know. And there are pages with generally helpful information, such as how to make a loan payment or options if you’re having trouble making payments.

Some of the informational pages, such as on the one about interest rates and interest capitalization, also have quick video explainers to help you understand the topic and why it’s important to student loan borrowers.

The actual loan application doesn’t have quite as nice of a design as the other parts of the Sallie Mae website, but it’s still relatively easy to navigate and fill out.

The fine print

The Sallie Mae product and informational pages give you a lot of the basic information you’ll want if you’re comparing student loans from several lenders. There are also loan application and solicitation disclosure forms for many of the loans online. In these, you can see fine-print items like the variable-rate loans’ interest-rate cap and late payment fees.

It’s more difficult to find fine-print information on some of the loans, though. The K-12, residency and bar loans don’t have application and disclosure forms on their pages, for example. We were only able to confirm these loans’ fees and interest rate caps by reaching out to a representative from Sallie Mae.

While you would have a chance to review your loan details after agreeing to a credit check but before signing the loan agreement, it would be nice to have that information up front.

We were also disappointed in how difficult it is to understand how loan terms work with Sallie Mae student loans.

Some private lenders only offer one term. Others offer a variety of terms and let borrowers choose their loan term. Most of Sallie Mae’s undergraduate and graduate student loans have a five- to 15-year term, but Sallie Mae chooses which term to offer you.

The loan-term range and the fact that Sallie Mae chooses the term rather than the borrower aren’t clearly disclosed on the loan’s main page.

What to expect during the application process

Sallie Mae has an online loan application system that makes the process fairly uniform for all its student loans. A few questions may differ, but you can expect the process to be similar to the following steps. Applicants with cosigners may need the cosigner’s personal information, including his or her Social Security number and date of birth.

Basic information

General information. Basic information about the student and borrower:

  • Your name, email address and phone number.
  • Your date of birth, citizenship status and Social Security number.
  • Your relationship to the student, if you’re taking out a loan for someone else.

Address. Your permanent address and a previous address if you moved in the last year. If you have a different mailing address you’ll have to fill that in, too.

Student and school information. If you’re taking out the loan for a student, you’ll need the student’s name, date of birth, citizenship status and Social Security number.

Enter the name of the school and your (or the student’s) academic information:

  • Degree type or certificate of study
  • Major or specialty
  • Enrollment status
  • Grade level
  • Academic period that the loan will cover
  • Anticipated graduation or certification graduate date

Loan application

Loan amount. The cost of attendance, which the application can help you estimate, as well as your estimated financial assistance.

You’ll automatically have a loan amount for the difference between your cost of attendance and financial assistance. You can choose to request less money, and even if you’re approved, Sallie Mae could offer you less than what you requested.

Employment info: Fill in information about your work, including:

  • Employment status
  • Employer’s name
  • Your occupation
  • Work phone number
  • Years with the current employer
  • Gross annual income

Financial info: You can list additional income and assets you have, such as:

  • Income from alimony, child support or a rental property
  • Investments
  • Disability
  • Social Security
  • Income from a household member, such as a spouse
  • Your current assets that could be in checking, savings, CD or money market accounts

You’ll also be asked about your expenses, including monthly housing payments (when applicable).

Personal contacts: Unless you’re taking out a loan for someone else, you’ll have to share two personal contacts that Sallie Mae can use as references. These could be a relative or family friends, and you’ll have to have their full name and phone number.

Submit application: Choose to apply on your own or add a cosigner. You’ll be prompted to read and agree to an electronic delivery consent form, and may then get a copy of the loan’s disclosure form and Sallie Mae’s privacy policy.

You’ll have to agree to let Sallie Mae review your credit history to submit your application.

Finalize the loan

Once you’ve completed an application, you may need to send verification information (such as pay stubs or tax returns). But generally, Sallie Mae will offer a quick response based on your credit.

If you’re approved, you can choose your type of interest rate and repayment plan before accepting the loan. Once you accept the loan offer, Sallie Mae will contact your school to verify that you’re eligible for the loan and loan amount.

The school certification process may take several weeks, and it could even be put on hold until about a month before your term begins. As long as everything checks out, Sallie Mae will send the loan to you or your school, depending on the type of loan.

Already have student loans and looking to refinance? Check out one of our top refinance lenders below.

Earnest
Fixed APR

3.47% To 7.72%

Variable APR

2.41% To 6.99%

Terms

20

Years

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Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at [email protected]

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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