Sallie Mae, the nation’s largest private student lender and one of the companies Georgetown’s Office of Financial Aid recommends to students, changed its signature loan policy this past Monday.
Under the old policy, students were given up to a six-month grace period after graduation during which they were not required to make loan payments. Sallie Mae’s new policy calls for students to make interest payments while still enrolled in school. Payments would begin the first semester of a student’s freshman year and would increase in size over the course of their college career.
The average student could expect to pay roughly $40 a month as a freshman. By the time the student is set to graduate, payments would be approximately $160 a month.
Under the new policy, loans will be repaid in 5 to 15 years, whereas in the past, loans were paid back in an average of 15 to 30 years.
“We are always listening to our customers and looking for ways to help them be successful. We think the college students and parents of today will see the value in paying a little now to save a lot in the long run,” Patricia Nash Christel, a spokesperson for Sallie Mae, said.
Though Sallie Mae acknowledges that these short-term loans will be harder for certain families to pay off, they noted that the new payment plan will reduce the average cost of a student loan by about 40 percent, from roughly $45,000 to $28,000.
“It’s a tough time right now, and I think a lot of these loan companies are doing what they can to keep their private loans profitable,” said Pedro de la Torre of Campus Progress, a student advocacy group aimed at increasing the availability of college tuition. “The good news is that there’s going to be a lot of assistance to students in the 2010 budget, and hopefully that will offset any pain that’s caused by this.”
Sallie Mae continues to offer federal student loans and encourages students to exhaust all scholarship and grant options before inquiring about private loans.
“We aren’t done evaluating our lender options for next year,” University spokesperson Julie Green Bataille said. “We don’t think the changes will have any effect on Sallie Mae’s position on Georgetown’s list [of preferred lenders].”
