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Sallie Mae announces new Income Sensitive Repayment option.

WASHINGTON--(BUSINESS WIRE)--Jan. 30, 1995--Sallie Mae today announced that it is now offering a new Income Sensitive Repayment Account to its student loan borrowers. This new account will allow borrowers under the Federal Family Education Loan Program (FFELP) to make monthly loan payments based on a percentage of their monthly income. The Income Sensitive Repayment Account is the latest in an array of flexible repayment plans offered by Sallie Mae, the nation's largest holder and servicer of FFELP loans.

Sallie Mae's Income Sensitive Repayment Account is designed especially for students who borrowed heavily to attend college and have relatively low incomes. Through income sensitive repayment, Stafford borrowers will be able to make payments ranging from 4 percent to 25 percent of their monthly income, based upon the borrowers' judgment of what they can afford. For borrowers who are interested in this new repayment account, Sallie Mae's customer service representatives will suggest a minimum monthly payment based on the individual borrower's education debt and income.

Borrowers electing Sallie Mae's Income Sensitive Account must repay their loans within the standard 10-year repayment term for Stafford and SLS loans, and the 30-year maximum repayment term for loan consolidation accounts. However, when income sensitive payments are less than standard principal and interest payments, borrowers may receive annual extensions of their repayment term, by up to five years while scheduled income sensitive payments must equal at least interest that accrues each month, Sallie Mae will make additional payment relief available to borrowers who need it.

"Every borrower's financial situation is different, so we offer a variety of repayment plans allowing borrowers to choose the best way to manage their eduation debt," says Lydia M. Marshall, executive vice president, Marketing. "Income Sensitive repayment offers low monthly payments for the longest period of any of our plans. However, because the trade-off to lower payments is higher total costs, Sallie Mae will be counseling borrowers to consider the income sensitive option as a last resort."

To help borrowers determine the plan that they prefer, Sallie Mae customer service representatives will be available to provide comparisons of borrowers' total costs under each of Sallie Mae's plans. Borrowers will be able to switch from the Income Sensitive Repayment Account to any of Sallie Mae's other repayment plans at their discretion. Under Sallie Mae's Select Your Terms service, Sallie Mae offers the Standard (level) Repayment Account and two plans which can also lower initial monthly payments -- its Select Step (graduated repayment) Account and SMART LOAN (consolidation) Account -- in addition to the Income Sensitive Repayment Account.

Sallie Mae also offers the Great Rewards and SMART REWARDS Programs that provide interest rate reductions to borrowers who make their payments on time, and the Direct Repay Plan that reduces the interest rate of borrowers who opt to make their loan payments electronically each month.

Sallie Mae is offering income sensitive repayment in compliance with the Higher Education Act of 1992, which requires Sallie Mae and other holders of FFELP loans to offer income sensitive repayment by July 1, 1995. In developing its plan, Sallie Mae sought to achieve compliance with the statute, while providing borrowers with as much flexibility and control over their indebtedness as possible. Sallie Mae's plan is available to any Stafford, SLS (Supplemental Loan for Students) or loan consolidation borrower whose loans it owns and services.

Borrowers who choose income sensitive payments are required to provide Sallie Mae with income data annually. They may change the percentage of income they pay each year, as long as it remains from 4 to 25 percent, and may opt out of the program at any time. For more information, Sallie Mae borrowers should contact their loan servicing center.

Sallie Mae supports the Federal Family Education Loan Program by providing financial services to schools, lenders, and families, including options that make student loans easier to repay. -0-

Sallie Mae Repayment Options

Fact Sheet

Income Sensitive Repayment Account:

Product Overview: Sallie Mae's Income Sensitive Repayment Account is one of a number of repayment options that make student loan repayment easier and more manageable. Income sensitive repayment allows borrowers to base their initial monthly payments on their gross monthly income (including pre-tax salary, self employment earnings, dividends, interest earnings, alimony, and tips). It is designed for borrowers whose loan debt is high relative to their incomes and who might otherwise have difficulty meeting their student loan payments. It can offer low monthly payments for the longest period of any of Sallie Mae's repayment plans.

Eligibility: The Income Sensititive Repayment Account is available to any Stafford, SLS or SMART LOAN Account borrower whose loans are owned by Sallie Mae and are in or entering repayment.

Product Features: Sallie Mae customer service representatives will be available to suggest the minimum amount borrowers should pay each month based on their education loan-to-income ratio, although payments must cover at least interest accrued. Ultimately, borrowers may choose to pay between 4 to 25 percent of their gross monthly income. To determine this ratio, divide total student loan debt by monthly income.

If ratio is this much: Then suggested minimum payments

would be this much:

less than 9 4%

9 to 11.9 6%

12 to 14.9 9%

15 to 17.9 10%

18 to 20.9 12%

21 to 23.9 14%

24 and greater 15%

- While scheduled payments must equal at least interest that accrues each month, Sallie Mae will make additional payment relief available to borrowers who need it.

- Borrowers electing Sallie Mae's Income Sensitive Account must repay their loans within the standard 10-year repayment term for Stafford and SLS loans. If the payments elected are less than standard principal and interest payments, the repayment term may be extended for up to five years. After that, payments must be the greater of the income sensitive payment or the standard principal and interest payment.

- SMART LOAN consolidation borrowers who elect income sensitive repayment and who choose payments that are less than standard principal and interest will have a second period of up to five years when payments may be the greater of the income sensitive payment or interest only, without a corresponding extension of term. After that, payments must be the greater of the income sensitive or standard principal and interest payments for the remainder of the term.

- Borrowers must provide Sallie Mae with income data annually. They may change the selected percentage of income, or switch to another repayment plan at their discretion. Borrowers may drop out of the income sensitive plan at any time by notifying Sallie Mae or simply not reporting annual income. In this case, Sallie Mae will convert their account to a standard repayment plan.

- The loan interest rate is not changed by income sensitive repayment although borrowers remain eligible for rate reductions via the plans Sallie Mae offers to all borrowers.

- Standard Repayment Plan: Lets borrowers make monthly principal and interest payments that remain level throughout their 10-year repayment term.

- Select Step(SM) Account: Allows borrowers to make lower, interest-only payments in the first two or four years and still pay off their loan within the standard 10-year repayment term. Initial, interest-only, monthly payments are more than 40 percent lower than payments made with a Standard Repayment Account.

- SMART LOAN(R) Account: Borrowers can combine all eligible loans (including loans not serviced by Sallie Mae) into a single consolidated loan with a single monthly payment. The SMART LOAN Account gives borrowers the lowest monthly payments over their repayment term by offering initial, interest-only payments that can be as much as 40 percent lower than standard level payments and by extending the repayment term from 10 to up to 30 years.

- Great Rewards(SM) Program: Enables Stafford loan borrowers who make their first 48 scheduled payments on time to reduce their interest rate by two percentage points for the remaining term. Available to borrowers who began repayment on or after July 1, 1993.

- SMART REWARDS(SM) Program: Enables loan consolidation borrowers who make their first 48 scheduled payments on time to reduce their interest rate by one percentage point for the remaining term. Available to borrowers whose SMART LOAN Account enters repayment on or after July 1, 1993.

- Direct Repay(SM) Plan: Lets borrowers authorize an electronic transfer of money from their bank account to Sallie Mae for their monthly student loan payments. Borrowers with Direct Repay will automatically receive a 1/4 percent interest rate reduction on their loans. Because Direct Repay helps borrowers keep current with payments, it can help those eligible for Great Rewards or SMART REWARDS achieve those benefits.

CONTACT: Sallie Mae, Washington

Ross Kleinman, 202/298-3013

Gisela Vallandigham, 202/298-3147
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Date:Jan 30, 1995
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