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Updated on February 21, 2023
If you’re struggling to keep up with student loan payments owed to Sallie Mae, consolidation might provide a path toward financial relief. Combining existing loans into a new loan with a single monthly payment can lower the bill, provided the borrower can obtain a lower interest rate and longer repayment term.
Before delving into the mechanics of consolidating Sallie Mae student loans, it’s worth clarifying a common confusion in the world of student lending: the terms “refinancing” and “consolidating” are often used interchangeably, despite significant differences between the two options.
While both aim to streamline loan repayment by merging multiple loans into a single loan, the benefits of each option vary considerably.
Refinancing, for example, offers the potential to save money by reducing the interest rate on both federal and private student loans. Consolidation, by contrast, provides greater control over federal loans. It keeps your eligibility for income-driven repayment plans and student loan forgiveness programs like Public Service Loan Forgiveness and the IDR Waiver.
Whether you’re just beginning the loan repayment journey or are a seasoned veteran, this guide will provide the knowledge needed to make an informed decision about consolidating Sallie Mae student loans.
You can consolidate Sallie Mae loans — with a private lender
Sallie Mae was once the nation’s largest student loan servicer and lender. It held the keys to most federal student loans doled out by the U.S. Department of Education.
But as with all good things, Sallie Mae’s dominance wasn’t meant to last.
The government looked hard at its student loan program and realized it could save millions each year by cutting Sallie Mae out of the federal student loan system and making loans directly to student loan borrowers. And thus, a new era dawned.
Nowadays, if you’re still carrying student loans with Sallie Mae, those loans are private student loans.
Sallie Mae loans can be combined into a new loan through the student loan refinancing process. Think of it as a cousin to consolidation, with the key difference being that consolidation deals solely with federal loans, while refinancing is the process of bundling private loans.
You can’t transfer or consolidate Sallie Mae loans into federal loans
Consolidating Sallie Mae student loans with a Direct Consolidation Loan is off the table, even if you have federal student loan debt. Student loan consolidation is exclusive to borrowers looking to bundle their federal loans into a new loan from the Education Department.
It’s no surprise why borrowers want this option. They would get federal benefits and protections such as deferment, forbearance, and income-driven repayment plans without damaging their credit score. The federal student loan consolidation process doesn’t require a credit check. Borrowers can simply log in to their StudentAid.gov account and apply within minutes.
Refinancing student loans, however, does not offer those forgiveness and repayment options. Plus, there’s a credit check, which means your creditworthiness plays a vital role in determining the new interest rate. Where you went to school, the loan amount you’re looking to refinance, and your current debt payments (e.g., credit cards, mortgage, auto loan, etc.) also matter. You’ll need a cosigner to get the loan if you don’t meet the criteria.
But student loan refinancing does offer a unique benefit that consolidation doesn’t: the ability to receive a lower interest rate. While consolidation will give you a fixed interest rate for the life of the loan based on the weighted average of your current loans, refinancing can provide a lower interest rate, provided you have good credit.
Related: Best Student Loan Refinance Lenders
But you can transfer Sallie Mae loans to another lender
If you want to simplify your Sallie Mae student loan repayment, transferring your loans to another private lender may be an option. Doing so could lower your interest rate, let you change your repayment period, improve your loan terms, switch from a variable rate to a fixed interest rate loan, or give you access to better customer service.
To compare refinancing options, use an online marketplace like Credible. Their tools will let you compare loan offers from multiple lenders to find the best choice for your needs.
Related: What Happens If You Default on a Sallie Mae Student Loan?
What if you can’t refinance your Sallie Mae loans
If you’re struggling to make your student loan payments and refinancing isn’t an option, don’t lose hope. There are a few steps you can take to manage your debt.
Start by contacting your loan servicer to request a lower monthly payment. Sallie Mae offers forbearance, deferment, and interest rate reduction plans to help borrowers avoid default and keep their credit in good standing. But remember that these options are temporary and won’t provide long-term relief.
If you need a permanent solution, consider negotiating a student loan settlement or filing for bankruptcy. While these options come with serious long-term consequences, they can give you the relief you need to get your personal finances in order once and for all.
Related: How to Get Out of Private Student Loan Debt
These complex options should not be pursued without careful consideration and guidance. Speak with a student loan lawyer or financial professional to understand your options and the potential consequences.
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