Signature Education Loans, and Why You Should Use Them

So, you have completed your FAFSA and you have received the list of loans and financial aid options available to you.  Unfortunately, even with the Perkins or Stafford loans offered to you, you still don’t have enough funds to match your semester or yearly budget!  Maybe your parents still make too much money.  Now what? 

Head Over To Sallie Mae

At that time, it is a good idea to check out Signature Student Loans, which are Federal Loans that act as a private lender.  These loans are not given to students based on their or their parents’ income. Rather, these loans look only at credit scores.

One of the more popular Signature Education Loan companies is Sallie Mae, abbreviated from Student Loan Marketing Association.  This government agency buys student loans from the bank lenders.  The bank sells the loan documents given to them by students to Sallie Mae; thus, that money that would have become stagnant goes right back into circulation to help other students. 

Signature Loans are taken over by the government, but are only given to students that have a responsible-looking credit scores.  However, considering that most students straight out of high school have no credit score, it is often asked of the parents to cosign. 

With the cosigner’s help, the student will have the benefit of the parents’ good credit score to bring the loan interest rate down.  Also, because the loan spurs from private capital, the aggregate loan amounts are much higher than the Stafford or Perkins.  The loan amounts range from a minimum of $500 to over $200,000, depending on your graduate status and area of study. With a cosigner, you can get the money you need while building the credit score you also need for a healthy financial life. It’s a win-win situation!

On the other hand, like other Federal Loans, Signature Education Loans do not require students to start repaying them off until six months after graduation, leaving school, or dropping below half-time enrollment.  Sallie Mae also offers the opportunity to consolidate the Signature Loans with Stafford. 

Signature Student Loans allow a maximum repayment period of 30 years, three times more than federal loans.  They are also very flexible if you are going through financial difficulty, or if you decide to return to school.  It is just important to stay in contact with your lender.  You want to make very sure to keep track of your finances so that the loan does not wreck you or your parents’ credit histories. 

Once you, the student, make 24 on-time payments, your parent, the cosigner is released from the loan contract, and it falls upon your shoulders to repay it in full.  While it is very important to see Signature Student Loans as necessary and useful, but make sure you only borrow what you need, and no more that that.

Signature Education Loans Vs Federal Loans

Here’s a bit of information to make distinguishing between the two easier:

  1. Both Loans are only available after completing the FAFSA
  2. Both Loans have a grace period of six months following graduation/lessening enrollment/leaving school to begin paying back.
  3. Both have reasonable interest rates, although the Signature Loan can have a lower rate depending on the credit rating.
  4. Federal Loans give about 10 years to pay off the loan without any deferments, whereas Signature Loans give 30.
  5. In the case of Sallie Mae Student Loans, if you have a Stafford and Signature loan, they can be consolidated together, in order to have fewer payments in the long run.
  6. Signature Loans have higher aggregate amounts than simple Federal Loans.