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Sallie Mae and its repayment interest

Discussion in 'Financial Aid' started by KellyBean, May 9, 2007.

  1. KellyBean

    KellyBean 2+ Year Member

    672
    1
    Jan 14, 2007
    In the middle of nowhere
    My Sallie Mae's interest rate is 10.25% with Prime + 2.00%. The fee at repayment is 3.00%. What is prime and what is repayment fee? It says that I don't have to pay interest while in school, but I think it is in my best interest to pay for it while in school. Do I have to pay a 3.00% when I make a monthly payment while in school or does it only apply to when I graduate? Is it 3.00% of the total amount? 3.00% on top of 10.25%? I tried to read it online, but I still don't understand anything. I just want to make sure cause I don't want to take out $20,000 and then end up with $200,000.
     
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  3. okbye

    okbye 2+ Year Member

    134
    0
    Apr 13, 2007
    Private loans have much more leeway in their terms than federal loans so your individual circumstances may vary. Private loans are always variable based on the prime interest rate (the rate banks use) plus whatever their markup is. If your rate now at prime + 2% is 10.25% then when you graduate it would be prime + 3% or 11.25%. The prime rate will not be the same when you graduate so that is not an accurate graduation rate, but just an example to try to answer your question. This will be your annual interest rate.
    You may not have to pay interest while you are in school but it is gathering on the loans. How often they capitalize it depends on the loan terms. Anything you can pay while in school will help you, private loans cost a lot of money in interest, but you need to ask them specifically about their terms for in school payments. Some companies won't allow it, some will.
    $20,000.00 for 10 years at 11.25% will cost $13,400.00 in interest. This is variable depending on how often they capitalize interest while you're in school and prime rate changes, your balance on graduation will be higher than $20,000.00.
     
  4. KellyBean

    KellyBean 2+ Year Member

    672
    1
    Jan 14, 2007
    In the middle of nowhere
    Thanks a lot!!! It helps!! But do you know what repayment interest is? So the higher the prime, the higher the interest rate?
     
  5. martin73

    martin73 Banned Banned

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    May 6, 2007
  6. okbye

    okbye 2+ Year Member

    134
    0
    Apr 13, 2007
    The prime rate is variable so there's really no way to know what it will be. When the prime rate goes up it usually makes the news because that means mortgage rates are going up, or any bank can tell you what it currently is. They can't tell you what it will be next year though.

    Since private student loans are always Prime + whatever markup the lender determines your rate will go up with the prime rate.
    The lender markup is determined in part by your credit score and usually students don't have much in the way of credit so if you consolidate after graduation you may be able to get a slightly better rate if your credit has improved.
     

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