Is Sallie Mae a Federal Loan? No, But It Used to Be

Updated on July 12, 2024

Sallie Mae is not a federal loan. Instead, Sallie Mae is a private student loan lender and servicer, meaning that the loans it provides and manages are not supported by the federal government. As a result, the recent actions taken by the Biden administration to pause payments, freeze interest, and offer loan forgiveness of up to $20,000 for Pell Grant recipients do not apply to Sallie Mae student loans.

But this wasn’t always the case.

Sallie Mae used to offer federal student loans under the Federal Family Education Loan Program. That changed when Congress ended the FFEL Program in 2014.

Nowadays, if your loans are with Sallie Mae, they are private student loans.

But if your loans were managed by Sallie Mae and were later transferred to a different company, then they are likely federal student loans.

Sallie moved its federal student loans to Navient

Once America’s largest student loan servicer, Sallie Mae shifted gears in 2014 and transferred all of its federal student loans to a new player, Navient.

These loans were issued under the Federal Family Education Loan Program and covered several types of loans, including:

Stafford Loans
Parent PLUS Loans
Subsidized and Unsubsidized Loans
Spousal Consolidation Loans

While these FFEL loans are eligible for various debt relief options such as deferment, forbearance, income-driven repayment plans, and student loan forgiveness programs, they are not automatically qualified for many of the relief initiatives rolled out by the Biden administration during the pandemic.

For example, the former Sallie Mae student loans cannot participate in President Biden’s debt cancellation plan, which the Supreme Court recently heard oral arguments on. These loans also cannot qualify for the Public Service Loan Forgiveness Program or the IDR Waiver.

To qualify for these programs, the loans must be consolidated into the Direct Loan Program, effectively refinancing the loans with the U.S. Department of Education. Once the loans come under the department’s ownership, all federal protections and student loan options are available to borrowers.

Sallie Mae now offers private student loans

Sallie Mae provides a range of private student loans for college students enrolled in various programs such as undergraduate, certificate, dental, medical, and health professional courses. Also, it offers private student loans for graduate students preparing for the bar exam or moving for medical and dental residencies, and credit cards and personal loans.

As a private lender, Sallie Mae provides educational loans distinct from federal funding. Private student loans can offer larger loan amounts than federal aid, and borrowers with good credit scores may be able to secure a lower interest rate. If you have a poor credit history, you can boost your chances of qualifying by applying with a cosigner. Once approved, you’ll have the option to choose between a variable or fixed interest rate.

But private student loans don’t offer the valuable benefits that federal student borrowers can enjoy, such as affordable monthly payments with income-based repayment options. To get lower student loan payments, borrowers with private student loans will need to explore refinancing options to get a better interest rate and longer repayment terms.

While anyone who meets the lender’s eligibility requirements, including a credit check and income requirements, can take out private student loans, these loans are typically a more suitable option only after borrowers have exhausted their federal aid options.

Before applying to Sallie Mae or any other private lender, it is advisable to file the Free Application for Federal Student Aid, or FAFSA, and max out your federal financial aid and scholarships before applying for private student loans.

Options if you can’t afford Sallie Mae loans

If you’re having trouble making student loan payments, explore a few Sallie Mae financial hardship options.

First, if your income has dropped because you’ve returned to school or are still in residency, Sallie will let you temporarily pause payments with a deferment. But if you’re struggling to make your student loan payments and are nearing delinquency due to job loss or a change in income, Sallie Mae rarely offers forbearance opportunities like those provided by the government and some private lenders.

One short-term option is to ask for an interest rate reduction. Sallie Mae generally lets borrowers temporarily lower their interest rates a few points to obtain a more budget-friendly payment amount. Alternatively, you can make interest payments while you work on improving your financial situation.

Another possibility is to refinance your student loan for a lower interest rate. Depending on your credit score and income, student loan refinance may help lower your interest rate and extend your repayment period.

To shop around for refinancing options, you can use an online marketplace like Credible to shop with multiple lenders simultaneously. But keep in mind that after historic lows during the federal student loan payment pause, student loan interest rates have crept up. So, if you’re considering refinancing, hold off until rates decrease.

Finally, if you’ve exhausted your repayment options and refinancing is impossible, filing for student loan bankruptcy may be your only long-term solution. While getting rid of student loan debt in bankruptcy is challenging, it’s not impossible.

To be eligible, you must file a lawsuit known as an adversary proceeding and prove that the loans pose an undue hardship. Recent bankruptcy court decisions and lawmakers’ backing of relief for overburdened borrowers suggest that changes may be afoot for private student debt. Read more about private student loan bankruptcy.

UP NEXT: How Does Interest Capitalization Affect Student Loans?