RESTON, Va., Feb. 20 /PRNewswire-FirstCall/ -- Tim Fitzpatrick, CEO of
Sallie Mae, the nation's leading saving- and paying-for-college company,
today sent the following message to student loan consumers:
(Logo: http://www.newscom.com/cgi-bin/prnh/20030617/SLMLOGO-a )
Feb. 20, 2007
Re: Straight Talk from Tim Fitzpatrick on Borrower Benefits
An Open Letter to Student Loan Consumers:
Student loan "borrower benefits" have received much attention in recent
weeks. These fee reductions and interest rate cuts can save consumers
hundreds of dollars over the life of their guaranteed student loans.
Proposed Congressional cuts to the student lending programs in Washington
threaten these important savings programs.
With the array of discounts and interest rate reductions offered to
guaranteed student loan borrowers today, here is some "straight talk" to
help borrowers evaluate the true impact of these benefits.
There are two types of borrower benefits on student loans:
-- Up-front Benefits -- These are paid when the student first receives
the loan. The most common up-front benefits are origination fee
subsidies on Stafford loans, which most credible student lenders now
offer. By paying the 2 percent federal government origination fee and
the 1 percent guarantor default fee on the student's behalf, lenders
save students hundreds of dollars when they need it most -- while they
are in school.
In fact, students have benefited from more than $1 billion in fees
paid by private sector lenders and guarantors this academic year. All
student borrowers qualify for these Up-front Benefits.
-- Repayment Benefits -- These benefits are paid after the loan enters
repayment. The most common repayment benefits are lower interest
rates and cash rebates. With most lenders, borrowers are rewarded for
on-time payments, on-line account management, and automatic
withdrawals from their bank account.
While repayment benefits can save borrowers money, it is important to
remember that a small percentage of borrowers may ever realize these
savings.
What are the most common reasons for losing repayment benefits?
-- Consolidation. Approximately 70 percent of borrowers will pay off
their underlying loans by consolidating their loans in their first
year of repayment. When a borrower consolidates, they pay off the
underlying loan with a new loan. That means the borrower is losing
any promised Repayment Benefits on the original loan(s).
-- Late payments. Only about 20 percent of borrowers who do not
consolidate make their first 36 monthly payments on time. The bottom
line is that less than 10% of borrowers will earn all the advertised
Repayment Benefits as they will either consolidate their loans or
miss a scheduled payment sometime during the first several years of
repayment.
Given this backdrop, here are some important reminders for student loan
consumers.
When selecting your lender:
-- Consult with your school's financial aid office to ensure that you
understand the benefits being offered, and that you are working with a
reputable lender -- a lender you can trust.
-- Choose a lender that offers Up-front zero-fee Stafford loans benefits.
This is money that you will receive in school, when you most need it,
with no strings attached.
-- Select lenders that are clear on how to attain and keep any rebates
and discounts.
-- Beware of web sites that claim to provide objective lender
comparisons. These comparisons often assume that all borrowers will
achieve all Repayment Benefits.
-- Perform an honest self evaluation before signing up for "promised"
discounts. Are you someone who is likely to make 2, 3 or even 5 years
of on-time payments?
-- If you consolidate your loans, be sure you understand the rebates and
discounts if any that the lender may offer on your new consolidation
loan.
-- Take advantage of debt management programs, entrance and exit
counseling and other resources schools, lenders and guarantors offer
to borrowers.
Although they can be complex at times to understand, borrower benefits
that reduce costs and encourage good repayment habits are valuable to
students and their families. The $1 billion of Up-front Benefits that
students received this academic year represent real cash savings when they
need it most. We encourage schools and students to call Congress and urge
them not to make cuts to student lending programs that will put important
money-saving benefits at risk.
Guaranteed student loans are the most consumer-friendly financing
products on the market.
The investment in education is likely to pay off handsomely throughout
a lifetime. Being a savvy consumer today will save hundreds of dollars
during the life of a loan.
Sincerely,
Tim Fitzpatrick
CEO, Sallie Mae
SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the
nation's leading provider of saving- and paying-for-college programs. The
company manages $142 billion in education loans and serves nearly 10
million student and parent customers. Through its Upromise affiliates, the
company also manages $15 billion in 529 college-savings plans, and assists
7.5 million members with automatic savings through rebates on everyday
purchases. Sallie Mae and its subsidiaries offer debt management services
as well as business and technical products to a range of business clients,
including higher education institutions, student loan guarantors and state
and federal agencies. More information is available at
http://www.salliemae.com. SLM Corporation and its subsidiaries are not
sponsored by or agencies of the United States of America.
SOURCE Sallie Mae
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