Sallie Mae finally offers fixed-rate student loans
Student loans, subject of a good deal of concern and debate at the moment, come in fixed and variable-rate configurations, just like mortgages. Interestingly, Sallie Mae, the largest private student loan lender, has never offered fixed-rate student loans until recently.
Same as mortgage loans
Just like mortgages, student loans can have variable or fixed interest rates. Just like mortgages, there are benefits and downsides. If the borrower plans to pay the loan off as quickly as possible, a variable rate loan is attractive; introductory rates are usually low, and if the borrower gets it paid off before the rate is raised, they have the loan paid off for less than if they had gone with a fixed-rate loan.
The person who plans on steady, reasonable payments for a good amount of time, however, should absolutely stick to a fixed rate loan. The cost remains fixed; though the monthly payment will never be lower, it will also never be higher.
Funnily enough, according to CBS, the largest private student loan lender in the nation, Sallie Mae, has never offered a fixed rate student loan. Other lenders, such as Wells Fargo, SunTrust and Citizens Bank, all do.
Finally on bandwagon
However, Sallie Mae has relented, joining many of its peers by offering student loans at one rate for the entire term of said loan. The rate, according to Bloomberg, is going to be determined by underwriting standards, credit history and so forth. However, prospective borrowers can now get a fixed-rate student loan through Sallie Mae at an interest rate between 5.75 percent to 12.875 percent APR starting on May 21, according to CBS.
Sallie Mae will still offer variable-rate student loans, which carry interest rates between 2.3 percent and 10.1 percent APR. The fixed-rate loans cannot be borrowed under a parents’ name, but many students will likely have a parent as a co-signer, as 88 percent of Sallie’s borrowers did in the first quarter of this year.
Sallie is the largest private lender to students, having originated $1.2 billion in student loans in the first quarter of this year, with a total loan portfolio of more than $37 billion.
Still a national concern
Student debt is an ongoing concern, both for political candidates who want to win plaudits from voters and the people that actually have to pay them back. Currently, according to ABC, Congress is mulling over whether to allow a legislated increase in the base rate for federal student loans, or subsidized Stafford Loans.
The rate is set to rise from 3.4 percent to 6.8 percent, which would double the amount anyone taking out student loans this year would pay in interest, adding an average of $1,000 to each borrower, according to NPR. Student loans are currently the fastest-increasing type of debt in the nation, with more money being owed in student loan dent than credit cards and auto loan debt, though unlike other types, cannot be discharged in bankruptcy.