Sallie Mae, the largest student loan provider in the nation, is offering a new student loan service for students that will help them build credit and repay loans more quickly.

any other loan companies may soon follow Sallie Mae’s lead.

The plan, called the Smart Option Student Loan, is designed to save students about 40 percent. The loan is able to be repaid nine years earlier than typical existing student loans. And, according to Sallie Mae’s Web site, this loan is for students who still need funds after they have received grants, scholarships and federal loans.

“Under the new program, customers will make interest-only payments while in school, so students avoid negative amortization and graduate with substantially less student loan debt. A freshman borrowing the average loan size of $7,700 would cut the payment time in half and save approximately $8,700, compared to most other private student loan alternatives,” a Sallie Mae press release states.

Sallie Mae is recommending their private student loans to families that have already explored options such as scholarship and federal student loans. In addition to their new Smart Option Student Loan program, Sallie Mae will continue to offer federal student loans, which do not require interest payments while the student is still in school.

The Smart Option Student Loan will be available for classes that start after June 1, 2009. Sallie Mae also recommends students join rewards programs such as UPromise to accumulate points on everyday purchases to help defer the cost of their education.

Sallie Mae hopes that students will embrace the benefits of this new plan.

“Today’s students are financially savvy and looking for affordable, responsible options to help with their investment in higher education,” said Jack Hewes, senior executive vice president and chief lending officer of Sallie Mae, in the press release. “We have tried to design this loan to be sensitive to the needs of students who not only rely on this financing to get to college, but also want a more manageable level of debt as they transition from school to work. Paying a little while in school guarantees that students will save a lot later.”

Sallie Mae’s new loan program comes as many banks and loan outfits have drastically reduced lending as a result of the ongoing economic recession. University President John J. DeGioia said in January that 119 companies have stopped issuing loans due to their lack of profitability.

As part of the effort to counteract the reduced loan availability, DeGioia announced last January that Georgetown is increasing need-based scholarship aid by 18 percent for the next academic year – up to $88 million.

“In general, Georgetown is working on a case-by-case basis with current students and families impacted by the effects of the economy but there have been isolated cases and not a widespread impact,” university spokesperson Julie Bataille said.

Although DeGioia has presented a multifaceted plan to help students and families counteract the failing economic situation, the overall effects of the recession remain unclear.

“It may still be some time before we know the effects of the credit crisis and recession on students and families, but we are constantly monitoring information to try to remain flexible to meet their needs,” Bataille said.

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