Step by Step Guide to Lowering Sallie Mae Interest Rate and Payments

Michael Lux Blog, Lower Payments, Student Loans 54 Comments

The following eight simple steps will get your Sallie Mae interest rate lowered to 3% and as a result lower, your monthly payments. Here is the story of how I stumbled upon this method.

Note: The following steps apply to Sallie Mae Private loans.  Click here for ways to lower your federal loan payments.

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. Its 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 prepared 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 (as we will see in the next step), 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… this may be worth an extra phone call.

Step #8: Renew your application each year. The rate reduction program lasts only one year. At the conclusion of the year you can apply again provided your finances are the same.  I’m told this can be done 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 6 months, your overdue balance will be set 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 period of 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.  Its tempting to yell and sometimes nearly impossible to be civil, but it is in your best interests.

Please share your experiences, both successes and failures, in the comments section as it can help future readers.