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If you are a student considering a degree even higher than the undergraduate one you recently earned, you're most likely in that unenviable position of wondering how to finance that degree. Well, recently Sallie Mae became the latest lender to offer its own version of the new type of "parent loans" called "Smart Option Student Loan" intended to help well-meaning family members fund their children's education -- maybe yours.
It's nice to have additional options for funding, but as always -- read the fine print.
It's a refrain that is heard day in and day out: education is getting prohibitively expensive. And it's not just our unreliable perceptions this time, either. A UPenn study gives us an idea of just how bad the problem has become over the years. Affordability of higher education has gotten worse for 45 states since the Great Recession.
Aside from considering the option of not going, students -- undergrad and grad -- in America usually turn to the federal government's Direct Plus loan first when considering their funding options. And at a current flat rate of 6.84 percent, it's not the worst, but it's certainly not the best rate one can find out there.
In fact, as banks continue to button up their purses, parents and families are becoming the new lenders.
Sallie Mae, already the nation's largest private student lender, says that it's new "Parent Loan" should be more flexible and less expensive than its federal counterpart. For one, the company offers a variable rate loan. Additionally, the rates begin at 4 percent. Its fixed rate starts off at 5.74 percent.
Of course, the catch is one's creditworthiness. Applicants with excellent credit will naturally enjoy lower rates, both fixed and variable. In fact, if one's credit is poor, it might actually make more mathematical sense for families to turn again to a federal loan since private rates will be far higher -- if one can even get offered a loan term at all.
Students who envision being in debt to the tune of hundreds of thousands of dollars would do well to consider their options carefully. A percentage point here or there can be the difference between managing one's loan obligations and getting crushed under monthly payments. Consider the Sallie Mae option, but always exercise due diligence.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.