The Sallie Mae Unsubsidized Student Loan and Other Loans for College

Those who decide to pursue a higher education generally take out loans to finance their time at the university.  That’s been the general trend for years, but it’s even more pronounced now.  Skyrocketing tuition costs have created a higher education system that’s built on a foundation of lending.

Minding the Campus outlines the student lending and tuition expense situation:

Even more alarmingly, college tuition and other fees have skyrocketed over the decades. It is hard to believe that as recently as 1980 the cost of attending a private college was only about $5,600. Now it’s about $34,000, an increase of nearly 500 percent that has vastly outstripped inflation. Some 58 private colleges and universitiesup from five– last year–are charging more than $50,000 a year in tuition, fees, and room and board for the current school year. Obviously few middle-class students or their parents can afford those sticker prices, so again it’s not surprising to learn that two-thirds of college students these days graduate with average debts totaling more than $20,000 (debts for graduates of professional schools are far higher), and that all but the best-endowed elite universities would have trouble surviving without federal infusions of cash to their students. The loan and grant programs have generated a double dependency, with both students and colleges on the federal dole, so to speak.

The Federal government provides a number of loan options for students, including the popular unsubsidized Stafford Loan program.  Staffords are the most popular option because interest doesn’t begin accumulate immediately, like it does with an unsubsidized loan.  However, there are need requirements and strict limitations on the amount a student can borrow under the Stafford program.  When they’ve hit that mark, they can investigate Perkins loans and other subsidized loan programs.

Sallie Mae was originally a government-operated lender and loan servicing agent.  Now, it’s a private company that offers many different loan types for students looking to close the gap between their resources and their financial needs.  As Money-Zine notes, “Sallie Mae offers students, parents of students and former students a wide array of services including access to federal student loans, private loans and even post graduate student loan consolidation.”  The Sallie Mae unsubsidized student loan is one of the many options available.

According to the company, the Sallie Mae unsubsidized student loan is not the preferred means of funding an education.  Sallie Mae outlines a three-level strategy for paying one’s college expenses.  They recommend students to get all of the “free” money they can (i.e. scholarships and grants) first.  Then, they should investigate any available federal student loans, starting with those that are unsubsidized (which generally have friendlier terms in addition to the lack of immediate interest accumulation) and then unsubsidized choices.  Private loans are a solution of last resort.  The Sallie Mae unsubsidized loan could fall into either the second or third category, depending on its exact nature, but it’s definitely not as beneficial as “free” money or subsidized loans.

Getting Information is Critical

This is a particularly important time for people to understand the differences between loan types and what programs like the Sallie Mae unsubsidized loan are all about.  Reading stories like that of Amanda Ly, who did all of the “right things” but was still unable to afford her college plans, make you realize how essential this kind of information can be.  The challenged economy and a variety of other circumstances are also decreasing the amount of overall lending.  As Michelle Singletary reports, student lending is down overall and that includes loans originating from Sallie Mae:

[P]rivate student loans are declining fast. According to a new report from the College Board, the amount of non-federal education loans in 2008-09 dropped by almost 50 percent from the previous year and fell to 13 percent of the market from 25 percent a year earlier.

SLM Corp., commonly known as Sallie Mae, recently reported a significant drop in its private lending. In its third-quarter report, Sallie Mae, the nation’s largest student loan lender, said it had originated $893 million in private education loans, a decrease from $2.1 billion for the same quarter a year ago.

College is expensive.  Loans like the Sallie Mae unsubsidized student loan may be a part of making a university education possible.  Anyone planning to attend school or who has children approaching college age should learn everything they can about available means of funding.