The Sallie Mae Consolidation Loan Is Gone, But Here Are 2 Smart Options

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Since the 1970s, Sallie Mae has managed or provided student loans to families to pay for college and graduate studies. The Sallie Mae loan consolidation was also available in the past, but they are no longer an option for borrowers.

That said, you may have federal loans eligible for direct consolidation by the federal government. But your private student loans will not be eligible for federal consolidation, only student loan refinancing.

In other words, if you are looking for alternatives to the Sallie Mae loan consolidation, your options will be different depending on whether you have federal or private student loans.

The Sallie Mae credit union is no longer

Prior to 2008, Sallie Mae offered consolidation loans. If you had multiple student loans, you could combine them with Sallie Mae Consolidation.

But Sallie Mae no longer offers consolidation loans or student loan refinancing. The company now primarily provides private student loans for colleges, as well as vocational training and K-12 schools.

Of course, just because Sallie Mae consolidation loans are no longer something that you are out of luck. Borrowers have a wide range of choices when it comes to paying off student debt, whether they need consolidation (for federal loans only) or refinancing (for federal or private loans).

Consolidation of your federal student loans

If you have federal student loans, you can consolidate them with a Federal Direct Consolidation Loan. Not all recent Sallie Mae loans will count because they are private, but people who borrowed years ago may have already had their federal student loans managed by Sallie Mae because it was an entity. sponsored by the government before becoming a private company.

In addition, federal student loans managed by Navient (a spin-off company of Sallie Mae) might also be eligible. According to Federal Student Aid, Stafford loans, Direct loans, and Direct PLUS loans are all eligible for consolidation.

Consolidation can help you more easily manage the repayment since you will only have one invoice to follow up. In addition, it allows you to choose new terms for the loan, perhaps extending them to 20 or 25 years.

Extending your terms might help if you’re having trouble paying your bills because your monthly payment will go down. But it also means that you’ll be in debt for longer and therefore pay more interest over the life of the loan.

Also, the consolidation might cause your interest rate to increase slightly, as your new rate will be the weighted average of your previous rates rounded to the nearest eighth of a percentage point. Still, that increase in interest might be worth it if you need the relief of lower monthly student loan bills.

Refinancing Federal and Private Student Loans

Another repayment option is student loan refinancing. Although Sallie Mae does not offer refinancing, other banks, credit unions, and online lenders do. Major refinancing lenders include Citizens Bank, Sofi, and Earnest.

Private and federal student loans are eligible for refinancing. You can choose to refinance a single loan, perhaps to lower its interest rate, or to refinance multiple loans to combine them.

Note that if you refinance federal student loans, they essentially become private loans. As a result, you lose access to federal programs and protections such as income-tested repayment plans and public service loan forgiveness.

To refinance, you must meet a lender’s credit and income underwriting requirements – or apply with a co-signer who does. Depending on your creditworthiness or that of your co-signer, you may be eligible for lower interest rates than you have.

Plus, you can choose new repayment terms, perhaps lengthening your term to reduce your monthly payments or shortening it to bring your repayment date forward.

Estimate long-term costs before making changes

Consolidating and refinancing student loans gives you the ability to restructure your debt in a way that makes repayment easier.

Consolidation can simplify your debt and lower your monthly payments with a longer repayment term. But refinancing could save you money with a lower interest rate and also allow you to choose a shorter or longer term, depending on your goals.

Whichever option you choose, make sure you understand its impact on your finances.

Play around with our student loan repayment calculator to estimate the short and long term costs of consolidating or refinancing. And if you choose to refinance, shop around to get your best rates.

By clearly understanding your borrowing costs, you can make an informed choice about refinancing or consolidating your Sallie Mae or federal student loans.

Rebecca Safier contributed to this report.


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