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College Students and Recent Grads

Sallie Mae Loan Consolidation Is Over, But Here Are Some Options

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Sallie Mae has a long history in the student loan world. Since the 1970s, this student loan giant has provided or serviced loans for college and graduate school students, as well as their parents.

Although Sallie Mae used to be government-sponsored, it’s now a private company that lends private student loans to cover education costs. And while it once offered consolidation options, you can no longer consolidate student loans through Sallie Mae.

So if you were looking for Sallie Mae loan consolidation, the bad news is that it no longer exists. But the good news is you have two other options for combining multiple loans into one.

2 alternatives to Sallie Mae student loan consolidation

While Sallie Mae loan consolidation is a thing of the past, you still have two options for consolidating debt: borrowing a direct consolidation loan from the federal government, or refinancing with a private lender. Here’s what you need to know about each.

1. Consolidate your federal student loans with a direct consolidation loan

If you’ve got federal student loans, then you can apply at StudentLoans.gov to combine them into a single direct consolidation loan.

The main benefits to federal student loan consolidation include:

  • Combining multiple loans into one: A consolidation loan can replace several loans with one new one, thereby simplifying repayment.
  • Choosing new repayment terms: You could stick with the standard 10-year term or put your loans on another plan, such as income-driven repayment or extended repayment.
  • Adjusting your monthly bills: If you’re struggling to pay bills each month, putting your consolidation loan on an income-driven or other plan could lower them. Plus, income-driven plans can end in loan forgiveness after 20 or 25 years of repayment.
  • Making certain loans eligible for income-driven repayment: Parent PLUS Loans, for example, don’t qualify for income-driven repayment unless you consolidate them first. After you do, you could put them on the income-contingent repayment plan.
  • Getting your loans out of default: Along with loan rehabilitation, consolidation is one way to get your loans out of default and back into good standing.
  • Switching to a new loan servicer: If you’ve had a bad experience with your loan servicer, you could change to a new one. Some federal loan servicers include Nelnet, Navient, and Great Lakes.

Although consolidating helps you simplify repayment and lets you choose a new repayment plan, it won’t save you money on interest. In fact, if you choose a longer term than what you have now, you’ll likely pay more interest over the life of your loan.

It’s important to note that consolidation doesn’t lower your interest rate, but rather takes the weighted average of your previous rates and rounds up to the nearest one-eighth of a percent. So, if you’re looking to save on interest, student loan refinancing could be a better option.

2. Combine federal and/or private loans through student loan refinancing

Your second option for combining several pieces of debt into one is via student loan refinancing. Unlike federal consolidation, you refinance with a private lender, such as a bank or credit union.

You can combine both federal and private student loans through refinancing. Note, however, that if you refinance federal loans, you lose access to federal programs, such as income-driven repayment and federal loan forgiveness.

Refinancing has its own benefits, however, with one of the biggest being the potential to save money by lowering your interest rate. Here are some major reasons to refinance:

  • Qualifying for a lower interest rate: If you meet a lender’s requirements for credit and income — or can apply with a cosigner who does — you could qualify for a lower rate on your refinanced student loans.
  • Choosing between a fixed and variable rate: Most lenders let you choose between a fixed rate, which never changes, and a variable rate, which is sometimes lower to begin with but can fluctuate over the life of the loan.
  • Saving money on your student loans: With a lower interest rate, you could save hundreds or even thousands of dollars.
  • Choosing new repayment terms: Private lenders often offer repayment terms between five and 20 years.
  • Adjusting your monthly payments: If you can afford higher payments, you could choose a shorter term than you have now and get out of debt more quickly. But if you’re feeling strangled by student loan bills, you might choose a longer term to reduce your monthly payments and create more breathing room in your budget.

If you’re interested in refinancing student loans, it’s easy to get a rate quote from a few lenders. By checking prequalification offers, you can see if you could snag a lower interest rate on your student debt.

Combining your loans can help simplify repayment

The average student loan borrower holds 3.7 loans, according to a 2017 report by Experian. With so many loans and loan servicers, you could have trouble keeping track of your monthly bills.

But if you consolidate your loans, you’ll only have to make one payment per month to a single loan servicer — plus, you might get the added benefit of selecting different repayment terms or even lowering your interest rate.

Even though you can’t consolidate student loans with Sallie Mae anymore, you still have the option of consolidating with the federal government or refinancing with another private lender. Before making any changes to your debt, though, make sure you understand the differences between federal consolidation and private refinancing.

Once you’ve thought through the pros and cons of each, you can choose an approach that will bring you one step closer to a debt-free life.

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.

Rebecca Safier
Rebecca Safier |

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

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College Students and Recent Grads

8 Things to Know Before Applying for Student Loans

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

8 Things to Know Before Applying for Student Loans
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If you’ve never borrowed money before, applying for student loans can be confusing. You might have to choose between federal and private student loans, for example, or a fixed or variable interest rate. With all your options, it’s crucial to learn how to apply for student loans before entering any kind of contract.

By understanding how to apply for college loans, you’ll be empowered to make smart decisions about paying for your education. This beginner’s guide will go over what you need to know about how and when to apply for student loans.

What to know before applying for student loans

1. Your loans might be federal or private

As a college student or parent of a college student, you have two options for student loans: federal or private. Federal loans come from the Department of Education and are available for any student attending an eligible school.

You can access federal loans, such as subsidized and unsubsidized loans, by submitting the Free Application for Federal Student Aid, or FAFSA. In most cases, it’s smart to max out your eligibility for federal loans before turning to a private lender.

This is because the federal government offers relatively low interest rates and a variety of flexible repayment plans. But since federal student loans come with borrowing limits, you might need more help to pay for school.

In this case, you could turn to private student loans, which come from a bank, credit union or online lender. Unlike federal student loans, you’ll need to meet underwriting requirements for credit and income to get a private loan.

Most undergraduates apply with a cosigner, such as a parent. Although private student loans can help fill the funding gap, be careful about borrowing a loan with a high interest rate. Private lenders typically aren’t so flexible if you run into financial hardship.

2. You may pay interest right away

Whatever type of student loan you borrow, you’ll have to pay back the principal amount and interest. As of July 1, 2018, federal student loans have an APR of 5.05% for undergraduates and 6.6% for graduate students.

Private loan interest rates vary depending on which lender you choose and how strong your credit is. Lenders in MagnifyMoney’s private student loans marketplace offer fixed APRs starting at 5.25% and variable APRs from 4.07%.

Because of interest, you’ll end up paying back a good deal more than you borrowed, especially if repayment spans 10 or more years. Plus, interest typically starts accruing from the date your loan is disbursed.

For example, let’s say you borrowed a $30,000 loan at a 5.05% rate. Over 10 years, you’ll end up paying $8,272 in interest. If you can pay off your loan in five years, you could save $4,263 on interest.

Note that subsidized federal loans, which are available to students with financial need, work slightly differently. The government covers interest while you’re in school on subsidized loans, so you’ll only have to start paying interest once your repayment period begins after graduation.

3. You’ll likely have a grace period

As a college student, you probably won’t have a lot of money to pay back your loans. Luckily, federal loans, as well as most private loans, don’t require immediate repayment.

Instead, you can postpone payments while you’re still in school and for six months after you graduate. This deferment is called a grace period, and it lets you focus on your education before having to worry about student loan payments.

But since interest might be accruing, you could choose to make small payments while you’re still in school. If you can swing small payments, perhaps with income from a part-time job, you won’t be facing such a big balance after graduation.

Note that some private lenders require you to make in-school payments, sending your first bill just a month or two after your loan was disbursed. Make sure you understand all the terms and conditions of a private loan before borrowing so you don’t accidentally fall behind on repayment.

4. You have various repayment options

Learning how to apply for student loans is a crucial first step, but you also need to know how to pay them back. Your options will look different depending on whether you’re borrowing federal or private student loans.

Federal student loans come with a variety of repayment plans. The standard plan spans 10 years, but you can opt for a different plan to adjust your bills, such as income-driven repayment or extended repayment.

Income-driven plans, which span 20 or 25 years, can lower your payments and end in loan forgiveness. But if you stretch repayment over two decades, you’ll end up paying a lot more in interest.

If you owe $35,000 at a 5.05% rate, for example, you’d pay $9,650 in interest over 10 years. But if you stretch repayment out over 20 years, you could pay $20,669 in interest. With a 25-year loan, you’d pay $26,688 in interest. So even though your monthly payments feel more affordable on an income-driven plan, you’ll end up paying more on your loan overall.

Private student loans work a bit differently. When you apply, you’ll choose your loan terms, typically somewhere between five and 15 years. After this point, you might not be able to change your terms.

Some lenders will be flexible if you run into financial hardship, and you might be able to choose new terms through refinancing. But you won’t have access to the many plans available for federal student loans, so make sure to choose your repayment plan carefully before applying for student loans from a private lender.

And no matter the repayment plan you select, you can always prepay your federal or private student loans without penalty.

5. Your private loan could have a fixed or variable interest rate

Federal student loans come with fixed interest rates that remain the same over the life of your loan. But private lenders set their own rates and assign the best ones to creditworthy borrowers. Plus, they typically let you choose between a fixed rate and a variable rate on your student loan.

A fixed rate stays constant, while a variable one could rise over time. If you’re spreading out repayment over a decade or more, a variable rate could cost you. But if you’re planning to pay back your loan quickly, electing a variable rate could save you money on interest.

6. You might be able to pause payments in certain circumstances

Even if you have every intention to pay back your student loan on time, you can’t help it if an emergency pops up. Maybe you lose your job and don’t have an income for a few months. Or perhaps you decide to return to school and want to pause payments again.

If you have federal loans, you can postpone payments temporarily through forbearance or deferment. Both programs let you pause payments, but you won’t have to pay interest on subsidized loans during a period of deferment — only on unsubsidized loans.

Forbearance is typically used during times of financial hardship, while deferment is more often used when you return to school, go on active military service, join the Peace Corps or experience unemployment.

Some private lenders also offer forbearance and deferment, but this varies by lender. Plus, there’s not much of a distinction between these two programs when it comes to private loans, since private loans will always keep accruing interest.

If you’re worried about your ability to keep up with payments, consider applying for student loans with a lender who offers this benefit.

7. You could qualify for loan forgiveness or repayment assistance

Depending on where you live and work, you could get some of your student loan debt wiped away through forgiveness or repayment assistance. Federal programs, such as Public Service Loan Forgiveness and teacher loan forgiveness offer partial or total forgiveness after a certain number of years of service in a qualifying organization or profession.

Many states also offer student loan repayment assistance to certain professionals who work in a shortage area or with a high-need population. Several of these programs offer assistance to pay off both federal and private student loans.

A growing number of companies are offering a student loan-matching benefit to their employees to help them cut through debt. If you’re looking to get your debt discharged ASAP, explore your options for loan forgiveness and repayment assistance.

8. You can restructure your debt through student loan refinancing

With Americans owing more in student loans than ever before, many are looking for relief. For some, student loan refinancing can help.

When you refinance, you give one or more of your old loans (federal or private) to a lender. That lender then issues you a new loan in their place, hopefully with better terms.

Creditworthy applicants can snag lower rates on their debt as well as choose new repayment terms, usually between five and 20 years. Not only can refinancing save you money on interest, but it also lets you adjust monthly payments in a way that works with your budget.

Along with these benefits, though, keep in mind one potential downside: Refinancing federal loans turns them private. As a result, you lose access to federal protections like income-driven plans and forbearance.

But if you’re confident you can pay back your loan on time, applying for student loan refinancing could be a strategic way to manage your debt.

Learn how to apply for student loans to pay for college

Most students should borrow federal student loans before turning to a private lender. Submit the FAFSA and you’ll have access to the world of federal financial aid.

But if you need more funding, learn how to apply for student loans with a private lender. You’ll need to fill out an application and submit your (or your parent’s) documents, such as pay stubs and tax returns.

It’s a good idea to shop around with lenders before choosing one. That way, you can find a private loan with the best rate to finance your education.

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.

Rebecca Safier
Rebecca Safier |

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

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College Students and Recent Grads

7 Private Student Loan Options That Let You Pause Payments

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

7 Private Student Loan Options That Let You Pause Payments
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With student loan debt in the U.S. surpassing $1.56 trillion, it’s not surprising that more than 1 million borrowers default every year. If you’re struggling with payments, you might be wondering about student loans with deferred payments.

Fortunately, you can pause payments on federal student loans through forbearance or deferment. Deferred private student loans are also a possibility, though policies vary by lender.

Here’s what you need to know about postponing payments on your student loans, followed by seven lenders that offer private student loan deferment and forbearance.

Forbearance vs. deferment: What’s the difference?

Both forbearance and deferment allow you to postpone payments on your student loans without going into default. But when it comes to federal student loans, these two programs have some key differences.

Deferment is available for students who go back to school, lose their job or are on active military duty. Forbearance is designed primarily for borrowers who have encountered financial hardship.

If you have subsidized federal student loans, they won’t accrue interest during deferment. But you will be responsible for interest that accrues on your loans, subsidized or not, during forbearance. So deferment is a preferable option if you have subsidized loans and can qualify.

While forbearance and deferment are different programs with federal loans, the distinction can get fuzzy with private loans. Some private lenders use the terms interchangeably since they effectively work the same way.

The downside of student loans with deferred payments

Pausing payments on your student loans could be important while you look for a job or work on your next degree. But unless you have subsidized loans in deferment, interest will keep rising.

Let’s say you owe $30,000 in student loans with a 5% interest rate on a 10-year term. After three months of student loans with deferred payments, you’ll accrue an additional $373 in interest. After a year of paused payments, your balance would increase by $1,500.

Taking loans out of deferment or forbearance is typically considered a capitalization event, meaning the interest that has accrued will be added to the principal. In effect, you’ll end up paying interest on top of interest.

That’s why deferment and forbearance should only typically be used as a last resort. If you can continue to make payments, or at least pay off the interest each month, you won’t run the risk of a ballooning student loan balance.

Another option is adjusting payments on your federal student loans through an income-driven repayment plan, which adjusts your bill based on how much money you make. Unfortunately, you probably don’t have this option with private student loans.

So if you can’t afford to pay, private student loan deferment could be the way to go.

7 lenders that offer private student loan deferment and forbearance

Terms and conditions vary by lender, and only some offer student loans with deferred payments. Here are seven lenders that offer deferment or forbearance on their private student loans or refinanced student loans.

1. LendKey

If you refinance your student loans through LendKey, you can apply for deferment for up to 18 months for any reason. LendKey approves these requests on a case-by-case basis, so make sure to reach out to your loan servicer if you’re having trouble making payments. However, LendKey doesn’t offer in-school deferment with its private student loans.

2. Sallie Mae

If you have a Sallie Mae Smart Option student loan, you could request up to 60 months of deferment for returning to school or taking part in an internship, fellowship, residency or similar program. Sallie Mae suggests it can postpone payments through forbearance for those who run into financial hardship, but it encourages borrowers to call customer service to discuss their options.

3. SoFi

Student loan refinancing provider SoFi lets you pause payments for a few reasons. Along with a general forbearance policy, SoFi offers deferment for economic hardship, unemployment or military service. It will also defer your payments while you’re in school. To submit a deferment or forbearance request, you’ll need to contact SoFi’s servicing partner, MOHELA.

As a SoFi member, you can also benefit from its career coaching program, which helps you search for jobs and transition into a new career.

4. CommonBond

CommonBond offers both private student loans and student loan refinancing. If you took out a cosigned loan for school, you’ll get a 60-month academic deferment, including the grace period. This means you won’t have to pay your loan while you’re in school or for a few months after graduation. Depending on your circumstances, you can also apply for up to 12 months of forbearance.

If you get a Master of Business Administration loan from CommonBond, you’re eligible for 32 months of academic deferment and 12 months of forbearance. Finally, CommonBond’s refinanced student loans are eligible for 32 months of academic deferment and 24 months of forbearance, which can be used three months at a time.

5. Laurel Road

Laurel Road allows forbearance for up to 12 months if you run into financial hardship. The provider, which funds graduate student loans and refinanced student loans, reviews forbearance requests on a case-by-case basis.

As for students in school, it’s up to you if you want to make payments on your loan or defer them until after you graduate. Laurel Road does not offer in-school deferment on its refinance student loan products.

6. Earnest

Earnest offers private student loans and refinanced student loans. If you go back to school, you can defer your Earnest student loan payments for up to 36 months as long as you’re enrolled at least half time.

And if you run into financial hardship, you can apply to skip a payment or put your loans into forbearance.

7. Education Loan Finance

Student loan refinancing provider Education Loan Finance offers 12 months of forbearance for financial hardship or disability over the term of your student loan. You’ll need to apply each month to keep your loan in forbearance. If you don’t contact Education Loan Finance each month, your loan will come out of forbearance and full repayment will resume.

Explore all your options before pausing payments

Deferment and forbearance options can be a godsend if you’re struggling to keep up with payments on your student loans. But both are a temporary solution, and your loans could get more expensive over time.

Before applying for deferment or forbearance, look into alternative ways to adjust your student loan payments. You might put federal loans on an income-driven plan, for instance, or refinance private student loans to get a new term.

While pausing payments can bring immediate relief, don’t forget to account for long-term costs before making changes to your repayment plan.

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.

Rebecca Safier
Rebecca Safier |

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

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