The following eight simple steps will get your Sallie Mae interest rate lowered to 3%, and as a result, lower your monthly payments.
Before jumping into the Sallie Mae Rate Reduction Program’s details, it is worth pointing out a couple of essential details.
- Sallie Mae created the Rate Reduction Program to help borrowers struggling with their private loans. People in a strong financial position will need to use other methods outlined below.
- This program applies only to private student loans. Federal borrowers will need to explore alternative ways to get lower interest rates.
Here is the story of how I stumbled upon this method.
Eight Steps for Enrollment in the Rate Reduction Program
Step #1: Get organized. Collect ALL of your monthly expenses. Know exactly how much you spend on rent, utilities, food, credit card bills/interest, and on your other student loans.
Step #2: Call Sallie Mae. Sometimes this can be the hardest part. It’s easy to procrastinate on this until tomorrow, but each day you wait, each day your debt problems get worse.
Step #3: Talk to the right person. In my experience, the customer service people are useless. They will offer to lower your payment by .25% if you sign up for auto-withdrawal, but that is it. Ask to be transferred to the collections department.
Step #4: As for the Rate Reduction Plan. Under the rate reduction plan, your interest rate can be lowered to as little as 3%.
Step #5: Discuss your finances. The rate reduction plan is only offered based upon financial need. Get the paperwork you put together before your call and be prepared to explain your expenses. They will do the math with you over the phone. Be ready to discuss what you can pay and how you plan on doing it.
Step #6: Make your monthly payments. Sallie Mae is not under any obligation to put you on this program, and if you are not making your payments, your balance will grow, and you may even get booted from the rate reduction plan.
Step #7: If you can, pay a little extra. The lower rate does not last forever. While you do have the 3% interest rate, take the opportunity to pay down a little extra on your principal. This will help you in the long run, especially when your rate jumps up again. Just be sure that the extra money you are paying is going towards a reduction in principal. It may be worth an extra phone call to verify the extra payments are correctly applied.
Step #8: Renew your application as needed. The rate reduction program lasts only six months. After six months, you can apply again. According to the Sallie Mae employee I spoke with, borrowers can renew for a maximum of 3 years.
Advantages of the Rate Reduction Plan:
- It lowers your monthly payments to Sallie Mae!
- It lowers your interest rate with Sallie Mae!
- If your loan is delinquent and you make the payments for six months, your overdue balance will go to zero, and Sallie Mae will report that you are current to the credit bureaus. This means your credit score will go up.
Sherpa Tip #1: This is a temporary fix. It lowers your payment and interest rate for a short time. Take advantage of this, but know that it does not last forever.
Sherpa Tip #2: This is not a term to your original loan agreement. Therefore, Sallie Mae is under no obligation to put you on the rate reduction plan. Be nice when dealing with your lender. If you are a jerk or rude on the phone, they will be much less inclined to help. It’s tempting to yell and sometimes nearly impossible to be civil, but it is in your best interests.
Things to Know About This Strategy to Lower Sallie Mae Interest Rates
I first discovered this program back in 2013 while helping a borrower. The rules and contact information have changed over the years, but the Rate Reduction Program still exists.
Sallie Mae does not advertise the Rate Reduction Program. It exists entirely to help borrowers who are in severe financial trouble.
Sallie Mae could discontinue the program at any point in time. Borrowers should plan accordingly.
Lower Interest Rates for Borrowers who are Not Struggling
Getting a better deal is much easier for borrowers who have a job and a decent credit score.
Rather than working directly with Sallie Mae, the idea is to take your business elsewhere.
The process is called student loan refinancing. Popular refinance companies include SoFi, Splash Financial, and ELFI. If a borrower refinances with SoFi, the borrower gets a new loan with new terms from SoFi. The money from the new loan pays off old student loans, like the ones with Sallie Mae.
The idea behind the refinance process is that someone with a college degree and a job is less of a credit risk than a college student. As a result, graduates can get much better interest rates than they could when they were students.
Please share your experiences, successes, and failures in the comments section to help future readers.