Sallie Mae to Provide Lowest Statutory Interest Rate to Federal Consolidation Loan Borrowers

Sallie Mae, the nation’s leading provider of education funding, is pleased to announce that it has been authorized by the U.S. Department of Education to ensure that borrowers receive the lowest statutory interest rate for new federal consolidation loans allowed under current law, as outlined in recent guidance issued by the Department.

The guidance outlined in Dear Colleague Letter FP-06-09 helps student loan borrowers obtain the lowest interest rate on new consolidation loans, by authorizing lenders — including Sallie Mae — to use the variable Stafford and PLUS rates in effect prior to July 1, 2006, provided the lender receives the borrower’s substantially completed consolidation loan no later than June 30.

The Department issued similar guidance last June, allowing Sallie Mae to offer record-low interest rates to more than 164,000 borrowers who rushed to submit their application paperwork in late June in order to beat last year’s rate increase.

“Sallie Mae is pleased to again have the opportunity to work with student and parent borrowers to help them lock down the lowest possible consolidation rate they can get under federal law and avoid a scheduled rate increase of nearly two percentage points,” said Patricia Scherschel, vice president of loan consolidation, Sallie Mae. “Student loan customers can help us help them by submitting their substantially completed applications by midnight June 30. Borrowers can submit the necessary paperwork in just minutes by taking advantage of our electronic application or online application concierge service.”

In addition, pre-July rates will be used to calculate the rates for consolidation loans for applications Sallie Mae receives by mail, provided the applications were mailed (postmarked) by June 30.

Student loan consolidation helps borrowers manage repayment by combining each of their eligible federal loans into a single, new, federally guaranteed loan — a Federal Consolidation Loan — with a longer repayment term, a fixed interest rate and the convenience of a single monthly payment.

Interest rates that will go into effect on July 1, 2006 for Federal Stafford and PLUS Loans first issued on or after July 1, 1998 and on or before June 30, 2006 will be 1.84 percentage points higher than they are today. Student loan customers may consolidate their loans and avoid the coming rate increase.