When you hear the name Sallie Mae, you probably think of student loans. There is a good reason for this; Sallie Mae has a long history, during which she has provided federal and private student loans.
However, as of 2014, all of Sallie Mae’s student loans are private and her federal loans have been sold to another provider. Here’s what to know if you have a Sallie Mae loan or are considering getting one.
What is Sallie Mae?
Sallie Mae is a company that currently offers private student loans. But it has taken on a few forms over the years.
In 1972, Congress first established the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress has given SLMA, commonly known as “Sallie Mae”, government sponsored enterprise (GSE) status to support the company in its mission to ensure the stability and liquidity of the student loan market as a than warehouse for student loans.
However, in 2004 the structure and purpose of the company began to change. SLMA was dissolved at the end of December of the same year and the SLM Corporation, or “Sallie Mae”, was incorporated in its place as a fully private company without GSE status.
In 2014, the company underwent another significant adjustment when Sallie Mae parted ways to form Navient and Sallie Mae. Navient is a federal student loan manager who manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan from Sallie Mae before 2014, it is possible that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).
Currently, Sallie Mae owns 1.4% of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans, and savings accounts to its customers, many of whom are students.
What is the difference between private and federal student loans?
When looking for funding to pay for your education, you’ll have a big choice: federal student loans versus private student loans. Both types of loans offer advantages and disadvantages.
Federal student loans are educational loans granted by the US government. Under the federal William D. Ford direct loan program, there are four types of federal student loans available to qualified borrowers.
With federal student loans, you usually don’t need a co-signer or even a credit check. Loans also come with many benefits, such as the ability to adjust your repayment plan based on your income. You can also suspend payments with a forbearance or deferral and maybe even qualify for a certain level of student loan forgiveness.
On the negative side, most federal student loans have borrowing limits, so you may need to find additional funding or bursaries if your tuition costs exceed federal loan limits.
Private student loans are educational loans that you can access from private lenders, such as banks, credit unions, and online lenders. On the bright side, private student loans often carry higher loan amounts than what you can access through federal funding. And if you or your co-signer has great credit, you may also be able to get a competitive interest rate.
As for the downsides, private student loans do not offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.
Are Sallie Mae Loans Better Than Federal Student Loans?
In general, federal loans are the best first choice for student borrowers. Federal student loans offer many benefits that private loans do not. You will usually want to complete the Free Federal Student Assistance Application (FAFSA) and review federal funding options before applying for any type of private student loan, including Sallie Mae loans.
However, private student loans, like those offered by Sallie Mae, have their place. In some cases, federal student aid, grants, scholarships, work-study programs, and savings may not be enough to cover education costs. In these situations, private student loans can offer you another way to pay for your education.
If you need to take out private student loans, Sallie Mae is a lender to consider. It offers loans for a variety of needs, including undergraduates, MBA schools, medical schools, dental schools, and law schools. Its loans are also 100% covered, so you can find financing for all of your certified school expenses.
Having said that, it is always best to compare a few lenders before committing. All lenders assess income and credit score differently, so it is possible that another lender will offer you lower interest rates or better terms.
The bottom line
Sallie Mae may be a good choice if you are looking for private student loans and other financial products. Just be sure to do your research up front, as you should before taking out any form of funding. Comparing multiple offers always gives you the best chance of saving money.