03.20.09 | A New Type of Student Loan?
Graduate students know better than anyone how hard it is to pay graduate tuition costs and afford general 
living expenses simultaneously. Often times a graduate student obtaining their MBA, or PHD have to rely on the Graduate Stafford loan, the Graduate Plus loan, and then borrow additional money utilizing private student loans for their living expenses. Private student loans have always mirrored federal loans in the sense that you don’t have to make principal or interest payments while you are in school. Recently Sallie Mae introduced a new loan product that will replace their “signature private loanâ€. The new loan has a few major differences from the typical private student loan we have all grown accustomed to. First, the loan will require interest payments while the student is in school. This does not mean $20 here and $20 there…on a 20,000 private loan with a rate of 8% and a ten year loan term, your monthly interest will be about $133. That can be a huge burden for a graduate student who is already having problems scraping by on tight monthly budget.
The upside of this new type of loan is that if you can afford those monthly interest payments, you will graduate with a manageable amount of debt. The problem a lot of students have now with private school loans is the unpaid interest is capitalized and added to their loan balance…so when they graduate they have a considerably larger debt than when they borrowed the loan. The amount they initially borrowed is now much larger and often times can have monthly payments that are out of reach for someone just entering with workforce.
This new type of student loan that Sallie Mae is rolling out will not appeal to everyone, but it does ultimately help the student in the long term when you compare it to the way existing private loans are now. It will also undoubtedly lower Sallie Mae’s default rate, which is currently hovering around 4.5%. (Default rate is the percentage of their student loans that are over 180 days delinquent). But let’s keep in mind that private loans in existence today ALL have the option for you to pay the interest while you are in school. The difference is that none of them make it mandatory for the interest to be paid while in school. Many students realize it does make sense financially to pay it while you are in school but as we all know, it isn’t always that easy to follow through with that. It will be interesting to see if other student loan lenders follow suit with this type of loan product.
Thoughts? Comments? Currently have the signature loan? Please share your experiences with Sallie Mae, and any other private student loan lender you have dealt with in the past.
Code: interest$$$
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Thanks for the information. Interesting.
April 13th, 2009 | #
Thanks
April 13th, 2009 | #
The site is informative and helpful. I am a returning student after sometime away from the school scene and it helps to know that is site is available.
April 11th, 2009 | #
It’s always good to gather information so you can make an informed decision. Thanks!
April 7th, 2009 | #
sounds like a good idea, but i like scholarships better
April 6th, 2009 | #
i like that this is here good information
April 4th, 2009 | #
Thanks alot
April 3rd, 2009 | #
I think it’s pretty unfortunate that these loans are considered as being acceptable to offer to make up for the part of school that you EFC doesn’t cover. Especially when you look up how much you can afford to pay in loans based on your future income, and realize that you actually can’t afford to take out as much as you would need.
April 1st, 2009 | #
very high interest not to good
March 31st, 2009 | #
the very high interest not to good its like you going to pay it for a long time until your done with your education
March 31st, 2009 | #
Very interesting information. I’ve never heard of this before. Thanks!
March 29th, 2009 | #
thank you for the info!
March 27th, 2009 | #
High interest loans should only be taken out as a last resort
March 26th, 2009 | #
Thanks
March 26th, 2009 | #
Im not so sure I’d consider this. On top of all my other current payments, I couldn’t afford to pay that much per month anyway. I’d prefer a loan that doesnt require you to pay until after school because then, I have a chance of getting it covered by scholarships instead of coming out of my own pocket.
March 26th, 2009 | #
very interesting. thanks
March 26th, 2009 | #
It would be a good loan for somebody who had a secure enough job to know they could afford the interest payments. I probably wouldn’t consider it because I do not need the additional stress.
March 26th, 2009 | #
Sounds nice but I wouldn’t want a loan unless I had no other option.
March 24th, 2009 | #
very good information
March 24th, 2009 | #
very interesting imformation
March 24th, 2009 | #
thanks
March 23rd, 2009 | #
I would probably consider this, if I didn’t have any other kind of financial aid.
March 23rd, 2009 | #