NEWARK, Del. – Student loan giant Sallie Mae introduced a fixed-rate private loan for students and families yesterday that is in direct competition with the growing number of credit unions offering the same product.
The rate on the new loan, available May 21, will range from 5.75% to 12.875%, depending on the borrower’s credit history and other factors. The nation’s biggest provider of student loans said it will also continue to offer variable-rate student loans at rates ranging from 2.25% to 10.125%.
Sallie Mae, at one time a government sponsored enterprise, has represented a growing competitor for credit unions ever since it went public 15 years ago and began offering its own loans, even as it creates a secondary student loan market and continues to buy and securitize loans for thousands of credit unions and banks. The new move comes as increasing numbers of credit unions are entering the private student loan market after the elimination of the federally guaranteed student loan programs in 2010.
Sallie Mae said families will have three in-school repayment options for either the fixed- or variable-rate loans: interest-only monthly payments, $25 fixed monthly payments or no minimum monthly payments.
Sallie Mae said its private loans also offer cash back rewards for in-school, on-time payments and an interest-rate discount for payments by automatic debit; up to $5,000 ($2,500 per semester) in tuition insurance coverage for academic year 2012-13; and cosigner release option available after the student graduates and makes 12 consecutive on-time principal and interest payments.
