A Guide to Sallie Mae Student Loan Consolidation

Sallie Mae Corporation (SLM) is a company which evolved itself into an independent body in 2004, after being a federal organization for almost 30 years from its inception in 1972. It was designated to provide financial support to students enrolling into pre-college and college educational programmes in the United States and had already provided services to about 31 million clients mainly consisting of students and their parents.

Student loans can be considered their core product along with many other products and services which will supplement these loans. It offers around 529 college-savings plans worth almost 26 billion. At any given time, SLM handles 10 million clients with loan values amounting to 186 billion US dollars which indicates the financial might of this institute.

Benefits of Sallie Mae student loans:

The idea of SLM is to provide students with low interest loans for educational purposes which can be repaid using flexible payments terms. It can offer both federal and private loans for education and as a unique feature a ‘consolidated loan plan’ can be provided for those who are eligible and have acquired several loans for college education.

Overview of loan consolidation:

At Sallie Mae, an eligible student is able to combine several loans that he or she has taken during college education in order to reap several benefits after completing the education. These benefits include, lessening the number of bills to settle during a particular month and reducing the amount paid as installments throughout the lifetime of the loan. Furthermore, it will provide the students with flexible payment options which may not be available when such bills and loans are paid individually. These payments options will include; graduated repayment, extended repayment, income-sensitive repayment and income-based repayment.

But, one should realize that, the value of monthly installment will depend on the present interest rates at the time of acquiring the consolidated loan and therefore, at times, the monthly installment may be more than what is already being paid when all bills and loans are combined. At the same time, paying over longer period may actually make a person pay considerably higher total amount than when paying using lesser number of installments. Due to its inherent complexities, SLM will offer these information up-front for the students as one of their priorities is to have ‘well informed borrowers’.

Federal Consolidation Loans:

This consolidation is provided based on Federal Family Education Loan Program (FFELP) and the government sets terms and conditions for offering the loan through SLM. SLM however, retains the right to add its own incentives and benefits to the final product. The interest rates for these loans are capped at 8.25 and the percentage will be determined through a process of ‘weighted average’ of existing student loans.

Private Student Loan Consolidation:

In contrast to federal consolidation loans, private consolidation loans are offered to those eligible college students to incorporate their hefty monthly bills as well as student loans into one product in order to take advantage of lower interest and affordable payment terms. However, private consolidated loans work according to a ‘variable interest rate’ calculated monthly.

Present status of ‘loan consolidation’:

Due to substantial cutting of federal grants and recent economic downturn, Sallie Mae is not in a position to offer loan consolidation neither as ‘federal student loan consolidation’ nor as ‘private student loan consolidation’. But, it continues to offer student loans at a low interest rate for those who want to undertake fresh loans from SLM.

Obtaining more information:

The Sallie Mae website offers necessary information regarding obtaining loans and consolidating the same. However, one should discuss loan consolidation with an accountant or a financial advisor at SLM in order to determine the best outcome as reversal of consolidated loans would not be possible once it is set in motion.