Sallie Mae announced today that it will offer a fixed-rate
private student loan starting May 21, in addition to the
variable-rate loans it has been providing.
The Kip Tips iPad App
The rate for the
Smart Option Student Loan
, which will be available to undergraduate and graduate students,
will range from 5.75% to 12.875% depending on the borrower's credit
history and other criteria. (The average credit score for Sallie
Mae customers in the first quarter of 2012 was 748.)
A cosigner is not required for student borrowers but is
recommended to help students without strong credit records qualify
for the loan and get a better rate, according to Sallie Mae.
College graduates can apply for a cosigner release after making 12
consecutive monthly payments on time.
Although it's the nation's largest student lender, Sallie Mae
isn't the first financial institution to offer a fixed-rate option
for borrowers. Banks such as Chase, Citizens Bank, PNC, SunTrust
and Wells Fargo already have been providing private fixed-rate
student loans, and their rates are comparable to the rate Sallie
Mae is offering on the Smart Option Student Loan. Sallie Mae's
variable-rate loans range from 2.25% to 10.125%.
The rate on the federal government's Stafford loan is 6.8% for
unsubsidized loans and 3.4% for subsidized loans (Congress sets the
rates). The 3.4% rate for subsidized loans will jump to 6.8% for
money borrowed starting in July unless Congress acts to block the
increase. Families who need help paying for college should try to
get federal loans first before turning to private loans. That's
because even the rates on fixed-rate private loans can be higher
than federal loan rates for borrowers without good credit scores.
And private loans offer little relief for borrowers who have
trouble repaying them; whereas the federal government offers
several repayment options (see
Strategies for Repaying Student Loans
me on Twitter