Question:
Can someone explain how Sallie Mae
works---they buy your loans and
you get a cheaper interest rate???
Answer:
Well, they buy your loans; whether
or not you get a cheaper interest
rate depends on the terms of your
original loan, whether your rate
is fixed or floating (right now
I wish I had that floating rate!!),
and whether or not you choose one
of their consolidation programs
like SmartLoan. See http://www.salliemae.com
for lots more info.
They pay all
your loans and issue you a new one
based on that balance. (Consolidation)
Just remember that when you enter
repayment, if you make additional
principle payments, always send
one that is less than the next full
payment or you will find you payment
due date simply pushed up one month
with no extra principal reduction.
(Sallie mae claims they will credit
things correctly if you send a note
with payment, but they always managed
to do mine wrong).
Actually,
they don't necessarily pay _all_
of them; they can buy just one or
more. So if, for instance, you have
one student loan with a halfway
decent interest rate but the rest
suck, you can get them to pick up
the others and continue paying your
original lender on the one with
a lower rate. Tricky, but still
possible.
Can someone
explain how Sallie Mae works---they
buy your loans and you get a cheaper
interest rate???
Sallie Mae
is a secondary market for student
loans. The bank from which you originally
took the loan may decide to sell
your loan to Sallie Mae who then
takes over the job of collecting
payments. Sallie Mae also repackages
the debt in ways that it can sell
to other investors, although your
payments still are processed through
Sallie Mae. You might be thinking
of the federal student loan consolidation
program, which is a program sponsored
by the US dept of education. It's
kind of like refinancing a mortgage.
The current rate is something like
7.3% and is indexed to the T-Bill
rate (or something). If you still
have loans at high interest rates
(e.g. my wife still has some at
9%), then you should look into refinancing.
Sallie Mae has it's own version
of loan consolidation, but when
we were looking at it, the federal
rate was better.
|
