Editor’s Note: I originally published this article in March of 2013. Over the years, Sallie Mae (and now Navient) has had different versions of “Rate Reduction” programs. While the name hasn’t changed, the rules seem to vary from borrower to borrower. The tactics mentioned below have helped numerous borrowers over the years. Going after the rate reduction program is an excellent way for borrowers struggling to get a much lower interest rate. Borrowers who have stronger finances, such as a decent income and credit score, will likely do better if they refinance their student loans with another lender.
Problem Background
If you’re like me, you’ve had some disappointing experiences trying to get assistance making your private loan payment more affordable. Fortunately, if you know exactly who to talk to and what to ask for, you might get Sallie Mae (and other private lenders) to lower your monthly payments and interest rate.
This article focuses on my experience getting Sallie Mae to lower interest rates. If you’re more interested in the steps to getting your rates lowered, check out our step-by-step guide to lower interest and payments from Sallie Mae. Also, it’s worth noting that this method applies only to private loans. If you want to lower payments on your federal loans, check out this article.
Finding the Rate Reduction Program
I stumbled upon this approach while helping another borrower whose private loan was delinquent. Sallie Mae was calling daily. This borrower, let’s call him Fred, could not afford his payments, however. When I called Sallie Mae on Fred’s behalf, they immediately transferred me to their collections department. I quickly learned that these are the people you want to talk to in order to get real help. They have far more authority to help than the typical customer service person.
Fred had missed months’ worth of payments, with a back-due balance of thousands of dollars. I explained there was no way for Fred to afford the payments they were seeking. The collections person at Sallie Mae was able to do two things for Fred. First, they addressed the monthly payment. They lowered his interest rate from almost 15% to 3%. Second, they addressed the sizeable outstanding balance. We agreed that Fred would make six monthly payments at the new low rate. If he did this, they would set his back-due amount to zero and inform the major credit bureaus that Fred’s account was current.
Rate Reduction Plan Terms
This new arrangement just saved Fred hundreds of dollars that year alone. Realizing this, I proceeded to ask the collections department representative all the questions I could about the arrangement. The following are some of the highlights of this discussion.
- They call this program, the “rate reduction plan.”
- They base enrollment upon income level.
- Only the collections department can sign up borrowers into this program.
- They require renewal every year to stay in the program.
She also told me that she had the authority to go as low as 3%, but her direct supervisor could go lower if necessary.
Getting Creative to Get a Lower Rate from Sallie Mae
Upon learning this information, I called Sallie Mae to see if they would lower the interest rate on my non-delinquent loan. I first spoke with a base-level customer service representative. She told me that all she could do was reduce my interest rate by .25% if I signed up for automatic bank withdrawals. She also said she could alternatively accept “interest only” payments at my current 13% rate. These were the same options Sallie Mae gave me in my prior interactions with them. These options aren’t helpful at making a meaningful dent in student loan debt, though.
So I then asked her about the “rate reduction plan.” She said she couldn’t do that and that I would have to talk to the collections department. I explained to collections that, although my payment was current, I feared I would become delinquent at its current interest rate. I said I wanted to enroll in the “rate reduction program” and be proactive to avoid delinquency. They accepted this rationale and proceeded to start my enrollment in the program.
Ultimately, I was unable to enroll in the program because I had a cosigner who exceeded the income level required to participate in the program. After sharing this advice with others, however, I can confirm that this approach can get your payment and interest rate lowered – even if you are current on your loan.
Please use the comments section below to share your successes and failures using this method. Please also include the lender you were working with so we can help as many people as possible.
