Sallie Mae tip on paying for college: If you need to borrow, the coming year may offer lower rates

Federal and private loan rates fall for academic year 2011-12

Wednesday, June 22, 2011 8:08 am EDT



Public Company Information:

"The good news for college students is that interest rates on several kinds of student loans are among the lowest in recent history"

Students who need extra funding for college can take advantage of changes in the law and improvements in the economy that translate into student loans at among the best interest rates in the last five-year period, says Sallie Mae, the nation’s No. 1 financial services company specializing in education.

“The good news for college students is that interest rates on several kinds of student loans are among the lowest in recent history,” says Joe DePaulo, executive vice president, Sallie Mae. “Our ‘How America Pays for College’ national study confirms that students and parents alike value the investment in a college education and are willing to stretch themselves financially in order to make it happen. Sallie Mae advises families to follow our 1-2-3 approach to paying for college so that you do not pay more for college than you have to: first, maximize ‘free money’; second, if you need to borrow, consider federal loans, and, third, fill the gap with responsible private education loans.”

While deadlines for many scholarships for the 2011-12 academic year have passed, Sallie Mae’s free scholarships database can help students identify any last-minute opportunities. In addition, it’s not too late to complete the FAFSA or Free Application for Federal Student Aid to check eligibility for federal grants.

For the 2011-12 academic year, interest rates on new need-based federal Stafford student loans will drop by more than 20 percent, from 4.5 percent to 3.4 percent, fixed. Rates on non-need-based federal Stafford loans or graduate Stafford loans remain at 6.8 percent, and PLUS loans remain at 7.9 percent, both loan types with rates fixed for the life of the loan. Most students awarded subsidized loans come from families with annual incomes under $50,000, though some with higher incomes can qualify due to family size or other factors. Dependent undergraduate students can borrow a maximum in subsidized federal Stafford loans of $3,500 for freshmen, $4,500 for sophomores, and $5,500 for juniors and seniors.

For college students who need private loans to fill the financial gap, Sallie Mae’s Smart Option Student Loan also offers new, lower variable rates and no disbursement fees. For the upcoming academic year, rates range between 2.25 percent APR and 9.37 percent APR for degree-seeking students, based on today’s LIBOR index. Sallie Mae also offers students in-school payment choices and shorter repayment terms that help lower the amount of interest paid over the life of the loan, as well as a new tuition insurance benefit. A typical freshman who borrows $10,000 and opts to pay interest while in school can save more than $5,200 over the life of the loan compared to a conventional, payment-deferred, private loan.

Sallie Mae advises families to follow the 1-2-3 approach to paying for college: first, tap college savings and maximize scholarships and grants. Second, explore federal student loans. Third, fill the gap with a responsible private education loan with your choice of in-school payment options to help you save money.

Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Celebrating 40 years of making a difference, Sallie Mae continues to turn education dreams into reality for American families, today serving 25 million customers. With products and services that include 529 college savings plans, Upromise rewards, scholarship search and planning tools, education loans, insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. Learn more at Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.


Debby Hohler (617) 454-6741 (media)