Sallie Mae began as a federal entity designed to market loans to students across the United States. Today it is a privately owned company well known as a lender to students throughout the U.S. Sallie Mae distributes and holds more student loans than any other lender in the country; as such, Sallie Mae loans are often the subject of consolidation packages.
Although you can't include Sallie Mae loans when doing a Federal Direct Consolidation, you can seek private loan consolidation options.
Sallie Mae Loans
Sallie Mae loans are typically used by students who require additional funding once all other options have been exhausted. Students who turn to scholarships, grants, work-study programs, private funding and federal loans first, but are still not able to cover all the expenses involved with college tuition, books and accommodations, often turn to private lenders like Sallie Mae. Sallie Mae private student loans allow borrowers to defer payments until after graduation, have no initiation fees and can be obtained in amounts up to the entire cost of annual tuition plus expenses.
Federal Direct Consolidation
Federal Direct Consolidation Loans help to combine multiple loans into one, eliminating separate payments and simplifying the process. Federal Direct Consolidation Loans are available to all students holding Subsidized and/or Unsubsidized Stafford Loans, Direct PLUS Loans, Federal Supplemental Loans for students, Federal Perkins Loans, Federal Health Education Assistance Loans and Federal Nursing Loans. If you have already consolidated your federal loans in the past, you may also be able to reconsolidate and add other outstanding federal student loans using a Federal Direct Consolidation Loan.
Since Sallie Mae is no longer a federally owned entity (since 2004), Sallie Mae student loans are not eligible for Federal Direct Consolidation. They are, however, eligible for consolidation with private lenders.
Private Loan Consolidation
Sallie Mae loans can be consolidated by a private lender like a bank or credit union. Some benefits of private consolidation are the reduction of interest rates below those of the original loan and the opportunity to remove co-signers (like parents) from the loan so they are no longer liable for repayment. The latter can be requested after you have demonstrated your ability to pay on your own, typically with a 24-month period of on-time payments.
Read the fine print when consolidating your Sallie Mae loans with a private lender. Some lenders charge origination fees, percentages or even penalties for payments made before the stated due date of your package.
Dangers of Loan Consolidation
Whatever type of student loans you have and whatever form of consolidation you end up signing up for, certain dangers must be taken into consideration. The extended payback period and lower monthly payments associated with consolidated loans are what attract many students to the process in the first place. These elements can cost you more over the life of the loan, however, since a longer payback period means more payments and more interest paid.
In addition, there is no grace period associated with most loan consolidation programs including the Federal Direct Consolidation Loan. This means that once you finalize the consolidation process, the payments begin the very next month. The typical loan is not due until six months after graduation or whenever enrollment falls below part-time status.