On Wednesday, the National Education Association unveiled a new loan program for the union’s members and their families to help pay for college and graduate school. The NEA Member Benefits Corp. and Sallie Mae have partnered to offer the NEA Smart Option Student Loan. The program features incentives to lower the cost of loans and interest rates that are at or below those of other major providers of private education loans.
Unlike the common payment-deferred, 15-year term private education loan, the NEA program allows the borrower two options: 1) Make $25 fixed monthly payments while in school and for the first six months after graduation; or 2) Make monthly interest-only payments while in school and during the six-months after.
An individual customer’s interest rate will vary depending on credit history and whether a co-signer applies, among other factors, and will reset periodically based on future changes in the LIBOR index. Based on the current index,undergraduate and graduate student rates for the $25 per month payment option range between 3.85 percent and 10.48 percent; rates for the full-interest payment option range between 2.87 percent and 10.21 percent.
There are no origination fees for degree-seeking students.
Students who use automatic debit to repay the loan monthly may be eligible for a 0.25 percentage-point interest rate reduction. Or, interest rates may be reduced by 0.25 percent if the borrower successfully makes 12 consecutive on-time payments.
The program is designed to to help families that have a gap in funding education. Under the Smart Option program, NEA members or anyone in their family can borrow up to the cost of attendance (tuition/room and board) at a college or university, less other financial aid received.
A version of this news article first appeared in the College Bound blog.