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

Sallie Mae doesn’t advertise the rate reduction program. However, borrowers that are truly struggling may qualify for temporarily reduced interest rates.

Written By: Michael P. Lux, Esq.

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Sallie Mae has a Rate Reduction Program that can help you get a lower Sallie Mae interest rate and, as a result, lower your monthly payments. The following eight steps provide a framework for enrolling in this program.

Before jumping into the steps, however, please take note of these essential details.

  1. Sallie Mae created the Rate Reduction Program to help borrowers struggling with their private loans. People in a solid financial position will probably need to use other methods as outlined below.
  2. This program applies only to private student loans. Federal loan borrowers will need to explore alternative ways to get lower interest rates.

Also, for those interested, here is the story of how I stumbled upon this method.

Eight Steps for Enrollment in the Rate Reduction Program

Step #1: Get organized.

Write down ALL of your monthly expenses. Know exactly how much you spend on them. Such expenses include rent, utilities, food, credit card bills, car payments and maintenance, gas, cable, phone, and your other student loans.

Then, write down all of your income sources and amounts.

Step #2: Call Sallie Mae.

Sometimes this can be the hardest part. We’ve all been there. It’s easy to procrastinate on this until tomorrow. But remember, each day you wait, your debt problems get a little worse.

Step #3: Talk to the right person.

In my experience, the base-level customer service department isn’t helpful in this endeavor. They can offer to lower your payment by .25% if you sign up for auto-debit, but that is it. Ask to be transferred to the collections department.

Step #4: Ask for the Rate Reduction Plan.

Under the Rate Reduction Program, Sallie Mae may lower your interest rate to as little as 3%. In extreme circumstances, they might reduce the rate even further.

Step #5: Discuss your finances.

Sallie Mae only offers the Rate Reduction Program based upon financial need. Before your call, make sure you have all the paperwork you assembled in Step #1. 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. If you’re not making your payments, your balance will grow, and you may even get booted from the program.

Step #7: If you can, pay a little extra.

The lower rate does not last forever. While you have the lower interest rate, take the opportunity to pay down a little extra on your principal. These extra payments 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 additional phone call to verify that Sallie Mae is correctly applying the extra payments.

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 interest rate with Sallie Mae.
  • Lower interest rates mean lower monthly payments.
  • If your loan is delinquent and you make payments for six months, your overdue balance will go to zero. Sallie Mae will also 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, consider taking 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.

Check out our page that tracks the national lenders and the current refinance promotions.

Please share your experiences, successes, and failures in the comments section to help future readers.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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