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Sallie Mae is one of the most widely trusted names in the student loan industry—at least they used to be. Now, after years of declining service quality and numerous scandals, the name Sallie Mae has become synonymous with the frustrating and often confusing process of repaying student debt.
Despite this decline in reputation, Sallie Mae still owns 18% of all private student loans—the largest share of any private lender. If you’re a Sallie Mae borrower, you may be wondering how to switch lenders. Whether you’re frustrated with the customer service experience, looking for better rates, or just trying to pay off your loans faster, we’ve got you covered.
Here’s what you need to know.
When getting rid of Sallie Mae loans makes sense
Borrowers with Sallie Mae student loans may have problems with their customer service department or may want to receive a lower interest rate by switching lenders.
Read below to learn when changing lenders may be a smart strategy.
If you’re unhappy with the customer service
Sallie Mae has notorious problems with customer service, according to online reviews. They have a 1.14 out of 5 rating from customers on the Better Business Bureau (BBB) as of January 27th, 2022, with 363 filed complaints. Specific complaints include inconsistent advice from customer service representatives and an unwillingness to work with borrowers who have problems making payments.
If you’ve had a negative customer service experience with Sallie Mae, you could refinance your student loans with another lender that has a better customer service reputation. You may also be eligible for a lower interest rate with a different lender, which could save you hundreds or even thousands in total interest.
When refinancing Sallie Mae loans, you don’t have to worry about giving up special protections like you would with federal student loans. Sallie Mae loans are private loans, so there are fewer downsides to refinancing.
If you want to lower your interest rate
If you want to pay less interest with Sallie Mae, you can sign up for automatic payments. Like other lenders, Sallie Mae offers a 0.25% interest rate discount when you set up autopay.
But if you want to save more on interest, the only option is to refinance your loans with another lender. Refinancing student loans is similar to refinancing your mortgage or auto loan. When you refinance, the new lender will now be responsible for collecting your monthly payment. If you have any issues, you’ll have to contact the new lender.
If you signed up for a Sallie Mae loan when you entered college, you may have a high interest rate because you were a college student with no credit history and no full-time income. If you have a stable job and a good credit score now, you’ll likely be eligible for a lower interest rate.
Remove your cosigner when you refinance
When your Sallie Mae loan was originated, you may not have had a credit history. Hopefully, you now have a stable job and a good credit score. You may want to refinance for many of the other reasons on this page, but removing your cosigner is another advantage.
Your loan shows up in the credit report of your cosigner, who is personally responsible for your loan if you fail to pay it back.
With a stable job and a good credit score, you may be able to refinance your loan and remove your cosigner. If you took out a life insurance policy to protect the cosigner, you can now repurpose that policy for other uses or terminate it, saving you money. Your former cosigner will also thank you.
If you want to pay off your loans faster
Sallie Mae does not charge a prepayment penalty, which is a fee that’s charged if you repay the loan ahead of schedule or refinance the loan. If your main goal is paying off your student loans faster while decreasing the total interest paid, refinancing to a new lender may be a good option to explore.
When refinancing, you can pick a different repayment term to maximize your interest savings. Lenders offer different interest rates for different terms. Generally, shorter terms have lower interest rates, and longer terms have higher interest rates. If your main goal is decreasing the interest rate, refinancing to a shorter-term loan can help you qualify for the lowest interest rate available.
When getting rid of Sallie Mae loans may not be necessary
If you have a desirable interest rate already or are close to paying off your student loans, you may want to avoid refinancing. Also, if you’re about to apply for a mortgage, refinancing could hurt your credit score and result in a higher interest rate offer from the mortgage lender.
You may also be able to remove the cosigner from your original Sallie Mae loan without refinancing it. Contact them to find out.
Keep reading for more ways to reduce your payments while keeping your Sallie Mae student loans.
If you’re struggling to afford your monthly payments
If you’re having trouble making your monthly payments, consider one of the following options before you refinance.
Enroll in automatic payments to receive a rate discount
Sallie Mae offers a 0.25% interest rate discount when you sign up for automatic payments. The discount will be applied every month that you have autopay set up. Plus, signing up for autopay means you won’t miss a monthly payment and incur late fees.
If you owe $50,000 in student loans with a 10% interest rate and a 10-year term, for example, you could save $828 in total interest over the life of the loan by signing up for autopay. While this isn’t a huge difference, it’s relatively easy to implement and does save you money.
Just make sure you have the money in your account each month. If not, the automatic payment could bounce, incurring bank fees as well as fees on your loan.
Apply for Sallie Mae’s graduated repayment plan
Sallie Mae offers a graduated repayment plan for borrowers, which is not the same as the graduated repayment option available for federal student loans.
Sallie Mae’s graduated repayment program allows you to only make interest payments for 12 months while you regroup financially. To qualify for this program, you must be within six months of leaving school or ending the grace period.
You also must have one of the following types of Sallie Mae loans to qualify for deferment:
- Smart Option Student Loan
- Graduate School Loan
- Health Professions Graduate Loan
- MBA Loan
- Law School Loan
- Medical School Loan
- Dental School Loan
Call Sallie Mae (800-472-5543) if you’re interested in enrolling in a graduated repayment plan.
Temporarily defer payments
Deferment is only available for borrowers who meet one of the following criteria:
- Returning to college
- Attending graduate school
- Starting an internship, clerkship, fellowship, or residency
Borrowers can receive a deferment of 48 months in total. Interest will accrue during deferment and be added to the loan principal. This will increase the total amount of interest paid over the life of the loan and may result in higher monthly payments.
Contact Sallie Mae to see if you can temporarily reduce your interest rate
According to posts on Reddit, Sallie Mae offers a rate-reduction program for borrowers to receive a lower interest rate. A few Reddit users said Sallie Mae decreased their rates from 10% to as low as 1% in some cases.
To take advantage of this program, call Sallie Mae’s customer service department and ask to enroll in the rate-reduction program. If the representative is not familiar with the program, ask to speak to a supervisor. Be persistent. Some Reddit users say they talked to multiple people before being enrolled.
If you want to get rid of Sallie Mae student loans, make sure it’s for the right reasons
When you refinance a student loan, the lender will pull your credit report, which may briefly decrease your credit score by five to 10 points. That’s why you should only refinance if you’re serious about changing lenders.
You should also know what you’re trying to accomplish by refinancing. Are you looking for a new lender because of a poor experience with Sallie Mae? Are you trying to pay less interest every month? Is your main goal to pay off your balance as soon as possible? If you’re not sure why you want to refinance, hold off. Otherwise, you may waste a lot of time and damage your credit without solving the real issue with your loans.
Author: Zina Kumok