Sallie Mae lowers interest rates on non-federal student loans
Source: Sandra Block / USA Today
Private lenders, faced with the loss of billions in subsidies from the federal student loan program, are beefing up their offerings of non-federal student loans, which could lead to lower interest rates and fees for qualified borrowers.
Sallie Mae, the USA’s largest private student lender, will announce today that starting May 10, rates on its Smart Option Student Loan will be 2.88% to 10.25%, based on the current London Interbank Offered Rate (LIBOR), the benchmark for the variable-rate loan. That’s down from a range of 4.38% to 12.88%.
The credit crunch led to a sharp reduction in non-federal student loans last year. Total volume of non-federal loans fell 50% from 2008, The College Board says.
But the loss of the federal student loan business, combined with a stronger economy, is reviving interest in non-federal loans, says Patrick Kandianis, co-founder of SimpleTuition, a website that allows borrowers to compare student loans. Up to 10 lenders are offering loans on the website, up from only two or three a year ago, Kandianis says. The company expects to add a few more this summer.
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