Sallie Mae and Alpine Bank have teamed up to offer the Smart Option Student Loan. The pair of lenders claims this is an innovative student loan that will cost borrowers less over time than other offers that are available.

Let’s take a look at Sallie Mae’s pitch for its new loan and the reality of what it offers students.

The Pitch

The Smart Option Loan promises to save you money over the life of your loan. It also features a shorter repayment structure meant to get you out of debt more quickly than other private student loans might. These features are meant to encourage responsible payment habits and to reward good credit.


Sallie Mae and Alpine offer 24/7 online account management with no penalty for paying off your balance early. You can apply online and receive a credit decision with an electronic signature option. This quick credit decision could be helpful because summer classes are just around the Memorial Day corner.

The Reality

The reason the Sallie Mae Smart Option Loan could save you money over time is because it requires interest-only payments both during school and during the normal six-month grace period after you finish school (either graduation or otherwise). Making these payments early could keep your debt from dragging on for many years after graduation.

And unlike some credit programs, there is no early repayment penalty or prepayment penalty, meaning you are free to pay more than you owe each month. This expedited payment structure also means larger payments per month once you begin repaying capital.

Other benefits, like the UPromise Rewards program and a 0.25% interest rate reduction with a debit payment plan, come standard on all Sallie Mae loans.

The Bottom Line

Many students are forced to live off of student loans while they pursue their degrees.  With part-time employment difficult to secure and internships increasingly dependent on students’ willingness to work for free, loan money can be a lifeline.

The interest-only payments, while a benefit over the long-term, could be strenuous for students while they are still in school. And the increased monthly payment after graduation is certainly a potential negative to consider.

If you use the Smart Option loan, make sure it will be eligible for consolidation with whatever other loans you may have in order to keep your total monthly payments manageable.

For more information on the Sallie Mae Smart Option Student Loan, click here.

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  • Erica (from Sallie Mae)

    Thanks for taking a closer look at the Smart Option Student Loan from Sallie Mae. I work at Sallie Mae and thought readers might be interested in seeing an example of how much a typical freshman can actually save. A typical freshman borrowing $10,000 would make payments of principal and interest for only 7 years after graduation rather than the typical repayment term of 15 years for other loans in which the interest builds up and gets capitalized. That’s pretty significant…and the same customer would save approximately $8,800—that’s more than 50 percent in interest charges. Under this scenario, a graduate who makes interest payments while in school would send in the last payment on the loan at the age of 29 instead of 37!

    • anonymous

      An average college education is not going to just be “10,000”. Its gonna be WAY more. And with the astronomical interest rates on this loan the student is screwed.

      • lisa

        try 14.% interest, DONT DO IT!!!!! this is robbery and I don’t know how they legally get away with doing this to young hard working individuals who do the right thing and pay their bills
        I am NOT a fan of sallie may because of this.

        • WillRetireWhenHellFreezes

          Sallie Mae makes the mafia look ethical. Some people are still under the impression they are a governmental entity. They are not. At one time they were a GSE, a Government Sponsored Enterprise. The execs lobbied to be allowed to take the corporation private. The execs made bundles of money. Everybody else got screwed. Do not do business with them. You’re better off working at McD’s and paying your way through community college. They are liars, cheaters and thieves. But they do it legally. More or less. Vote with your feet and don’t the bait.

  • Tom

    Thank you for your comment Erica. On the disclosure of the private loan, it states there is no pre-payment penalty. However, the next sentance in this paragraph states that no finance charges/interest will be returned if you pre-pay. I wasn't sure if this only meant the finance charges that had accumulated until the day of the prepayment or you had to pay the enitre finance charges on the loan you take out even if you pay it early than the established term.

  • Melinda

    Erica, my problem with the Sallie Mae Smart Loan is there is no maximum limit on the APR for the life of the loan. The disclosure also gives me an example of what payments would be at 25% (hypothetically). I wonder what payments would be at 30% or 40% given that there is no cap on the interest rate for the life of the loan. I don't know how “SMART” this loan really is. Having a loan with a fixed interest rate is much smarter than an open-ended variable rate with no maximum APR.

    • Miss Rikasan

      you’re right melinda…and i recently HAD no choice but to apply for a sallie mae loan for living expenses so i can attend a f/t 11 month school program. UNFORTUNATELY there used to be fairly recently -reasonable options w/ lower fixed apr’s.
      BUT when the health care bill passed – the republicans slipped in a bill that basically emliminated the reputable lower apr funding sources and gave sallie mae – the company we gave hunderds of millions in our taxpayers bailout $ to – a MONOPOLY on student loans
      TO BOOT – they make it insanely hard to even get one

  • Melinda

    Erica, my problem with the Sallie Mae Smart Loan is there is no maximum limit on the APR for the life of the loan. The disclosure also gives me an example of what payments would be at 25% (hypothetically). I wonder what payments would be at 30% or 40% given that there is no cap on the interest rate for the life of the loan. I don't know how “SMART” this loan really is. Having a loan with a fixed interest rate is much smarter than an open-ended variable rate with no maximum APR.

  • Duayned

    Melinda, thanks for adding some realistic concerns to all “smart” talk on this subject. My daughter is considering a Sallie Mae loan, but I was shocked and disappointed to see that the loans have uncapped variable rates. We've all read the horror stories about variable rate home mortgages!
    I mean, rates have nowhere to go but up now — it's not “if,” it's just “when.”

  • anonymous

    DO NOT GET THIS LOAN!! Here is the thing about this loan, since my interest is not caped, it is up to 10.87%! It doubles the interest of the other loans i have with Sallie Mae! Another thing is since there is all this legislation, Sallie Mae will not let me consolidate!!!!! I cannot consolidate with any one else either, so i am basically screwed because my monthly payment is gonna be 875 dollars!!!! The government NEEDS to step in and do something and stop screwing the students by stopping Sallie Mae from consolidating their own loans! For poor people that want to make something of themselves, we go to college and then guess what… we are punished with these ridiculous interest rates and stupid policies. Thanks a lot Sallie Mae. It seems your smart option loan isn’t so smart at all. In fact its dumb as hell, and who ever came up with this idea is one evil, greedy person!

    • Llkslay

      dumb is exactly right. I have tried to find a way to consolidate this and can’t . My daughter owes 18,000 on this loan and at 14 % interest, along with the other SallieMay loans she owes 113,000$ before interest,. this should be called screwedoption Not smart option

  • Mel

    My life is basically ruined because of this loan. These people are evil.

    • Michelewass1

      Right there with you. Payments can’t be lowered ever, even if you aren’t making enough money??? How could they do that to all of us…

  • Ty21981

    Sallie Mae does not offer loan consolidation according to their representatives.

  • Knivesandafork

    This is a terrible and completely unrealistic loan option for students.  There are absolutely zero options on this loan to refinance, defer, forbear, or consolidate.  A $700 monthly payment that is wholly inflexible is nearly impossible to deal with in today’s economy, unless you’re one of the very few and very lucky who have been able to get a job with an excellent salary right out of the gate of college graduation. 

    • Mark Lasich

      This is VERY true.  I just spent 20 minutes on the phone yelling at the rep.  As I stated, I wanted to pay the loan back (I currently am paying the interest, which I can afford), however once it goes into repayment I cannot afford the $400 something monthly payment.  DO NOT GET THIS LOAN.  There are NO, repeat NO options other than the standard payment amount once it goes into repayment. 

    • Idalis Rivera

      I am having this same issue, where they are asking me to pay $800 monthly. What have you been able to do about this?

  • john

    This is the worst loan possible. We took one for 6K for our son back in 2009 and even with paying interest payments of $62 dollars monthly since then, we still owe over 6k! Do not fall for this loan, interest rates are over 10%!

    • Ksweeney

      I am in the same position as everyone else here…SUCH AN AWEFUL LOAN…when you get the payments and are not able to afford them what do you do? Do you just not pay them? what happens? Because there is no way i can possibly pay my 800 a month either

  • Tom

    Working with Sallie Mae is a waste of time on this loan. They will do nothing till its pass due. so here we go no payments. Lets see what we can do with this. 

    • krisb

      I tried to go the no payments route for the loan I co-signed for my daughter. After about 15 days past due I started getting calls. When we hit the 30 days past due the calls increased exponentially, some days I would receive upwards of 10 calls. I finally answered one day which slowed When I did talk to someone finally at about 50-60 days past due, I told her my daughter couldn’t pay the loan, they being Sallie Mae give NO options, thus she was willing to default and let it go to collections in order to be able to negotiate a payment – she told me that they won’t put it in collections until after it’s 90 days past due. I indicated that I was more than aware that it was impacting my credit but my daughter was adamant that she wanted to handle it and not saddle me with the payment, my options was to tolerate the calls for another 30-45 days. I changed my ringtone for about 5 numbers which I knew were Sallie Mae and they just kept calling on different numbers (I’m guessing they figured the calls were being blocked as they are consistent numbers for quite some time). Finally I could no longer handle the calls and the disrupption to both my professional and personal life and I told my daughter I had to make the payment…. So if you’re going the no payment route – good luck, it’s not a bad idea as credit agencies will at least work with you – but be prepared for brutal persistent phone calls.

  • Llkslay

    this is an absolutely stupid way of taking out a loan. my daughter did this , has great credit, i cosigned i have a very high credit score, and she is being charged 14.46 % interest!! Ridiculous. she will never get ahead,

  • Melissa

    I’m screwed because of this loan too. My monthly payments will be about $700 and they do not work with you at all to lower them. There is no way for me to live on my own and pay this monthly. I am very disappointed that the ONLY option they give me is a forbearance in which I have to pay $150 every 3 months to NOT pay on my loan. This is a total scam and has definitely ruined my life. Where I am going to come up with the money and support myself is beyond me especially since the only job I can find right now is a cashier position. So much for my college education…

    • Fatimai81

       Is taking out a $4000 loan from the smart option plan, with no other additional loans except for federal loans, a good idea?

  • Juzplayn

    ALL I HAVE TO SAY IS THANK YOU!  Thank you for opening up our eyes BEFORE getting involved with Sallie Mae.  My daughter is going into college and we are in loan mode right now and oh so confused by it.  We most likely will go with NJCLASS but wanted to double check and research Sallie Mae.  Thank Goodness I did!!!  I am sorry for all of you that have this major debt.. This is something I am trying to avoid for my daughter.  THANK YOU AGAIN and GOOD LUCK to you all! 

  • kjk211

    I hate this loan. I got this back in 2009 and another in 2010. I got the loan when it was brand new and I pay $450 a month and now they offer options with the newer loans but not with the ones I have. They expect u to pay monthly even if don’t have it.

  • I’m appalled by the interest rates being charged here. I was intrigued by the 2.25% starting interest rate. I reasonably assumed, given that my credit score is better than 90% of Americans’, that I might be able to get an interest rate below the 8% that federal loans charge, and was willing to accept some interest rate risk in the near term. Well, NO. Sallie offered an interest rate of over 9%, nearly the top of their “range,” which makes me suspect that very few prospective borrowers are ever offered anything much less.

    No, thank you.

  • Jillian

    This loan is awful. When I began college my parents decided that this was the only loan they would cosign for, and I had already been at my school for a year. I decided it was my only option and signed on. I am now working a great job in my field, but more than half of my paycheck goes to paying back these Sallie Mae “Smart Option” Loans. They’re really terrible. I’m not sure how they expect people who haven’t been as fortunate as me to find a decent paying job after graduation to repay them. I barely make ends meet because of this loan. There needs to be much more thorough explanation of what this loan really entails before they let 18 year olds sign their adult lives away to this loan.

  • Stephanie

    Taking a Smart Option Loan from Sallie Mae is like taking a leisure cruise on the Titanic. Do NOT do it.

    It will NOT end well.

    Sallie Mae is unscrupulous in its business dealings and this loan, contrary to the name, gives the borrower no options whatsoever. Now, two years out of college, I am struggling monthly to pay the $600 minimum payments required and my mom’s credit score is being damaged due to my inability to pay regularly (she co-signed for me). The interest rates are insane and my guilt over having affected my mom’s financial situation negatively is only compounded by the fact that now my personal credit score is trashed. It will likely take decades to repair my finances after I pay off this criminally inflexible loan. The irony is that this was my first real loan; I never even had a chance.

    I wish never heard of Sallie Mae. I wish someone had warned me.

  • Name

    Awful. My daughter tried to apply for the income-based repayment program and was told she can’t because this type of loan doesn’t allow that.

  • po’d mom

    Sounds great on the surface … BUT if the student does not secure gainful employment after graduating Sallie Mae will not reduce payments in any manner. They will not budge to work with the student at all. They are willing to postpone payments for three months for a fee.

  • Vince

    sallie mae is nothing but !@#ing scum. the “smart option” loan is nothing short of robbery. my 2 smart option loan payments are nearly 900 dollars, thats more then 12 federal loans (310 total) and 2 private loans from chase and wachovia (150 apiece) for the same amount of money borrowed. robbery