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Hi NPrins!

Is it really a 2% reduction, or does the rate stay the same, and an amount equal to a 2% cut off the interest get applied to the loan as an additional payment by Sallie? it sounds like the rate always stays at 8% (or whatever variable rate), and the "Great Reward" is a totally separate transaction. If the two are put together, it's like you got a reduction of 2%.

This seems to me the only way they can get away with saying that you lose the benefit if you move out of their payment plan. In a normal loan, once you have 4%, that's what you have.

(I wonder if people can go lock in Direct Loan's low rate, which is permanent (not a credit applied to the loan) after 12 months' payments are made, and then migrate over to Sallie with a 5.2% loan, and inevitably get a 3.25% loan if they pay within 10 years . . .)
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Hi! First, I'd like to say that I agree with AF4L's praise of your advice. I am one of those people who has been silently benefitting and taking notes! Thanks!

I agree that once your interest rate is reduced, that is the rate you have. But here is the link to Sallie Mae's site regarding Great Rewards: http://www.salliemae.com/loans/benefits/rewards.html Basically, it says that borrowers “will earn a full two percentage point interest-rate reduction” after making their first 48 payments on time, so it sounds to me like your interest rate goes down 2%. It also says that the monthly payment will stay the same because the savings are applied to the loan balance. Finally, it says that “borrowers who sign up for an extended repayment plan lose eligibility for Great Rewards.” When I spoke with the Sallie Mae rep on the phone, she said that if I consolidated the loan after the 48th payment, the interest rate that would be reported to Direct would be my rate without the 2% Great Rewards deduction.

You raise an interesting point about locking in Direct's low rate and THEN going to Sallie Mae, making your first 48 payments on time, and getting an additional 2% reduction based on Great Rewards. Something tells me that it wouldn't fly with Sallie Mae though (although I can't say why not)!

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