Dear Steve,
I currently have a bit over $67k in student loans through sallie mae at 6.5% interest rate consolidated. I have never missed a payment and pay an extra $120 a month to pay off my loans faster for a total of approximately $681 a month to Sallie Mae. I consolidated them back in 2007. I've asked Sallie Mae what can I do to lower my interest rate and the response is there is nothing I can do to lower it. I know they offer settlements to people who cant pay on their student loans. It feels like I'm being punished for paying on time and in excess.
What can I do to lower my interest rate or have Sallie Mae negotiate with me?
Cherish
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Dear Cherish,
It is true that Sallie Mae will settle some student loans. They do so for around 50 percent or so of the balance and typically divide the settled amount up into a few installment payments or just one payment.
However I've only seen Sallie Mae offer this option to people who are substantially delinquent on their loans. And as you are aware, intentionally going into default will raise your interest rates, can lead to a higher balance owed, will put you in collections, hurt your credit, and potentially get you sued.
It seems like the pitfalls outweigh the benefits for a strategic default. But that's really a choice you have to make with wide eyes.
I can't see any reason why Sallie Mae would want to settle with you when you've demonstrated an exceptional payment record and in fact pay more than the minimum required. It sounds like you are their perfect customer and in the profit making sweet spot for them.
To pay less overall interest on the loans you should pay them off in full, remaining current, and as quickly as possible. Any interest rate reduction would be through Sallie Mae and you could look to an outside source to refinance but I bet you'd find much higher interest rates.
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