By By Katie Curren, News Correspondent

As the economy continues to hamper families’ abilities to pay for education, Sallie Mae recently unfolded the new Smart Option Student Loan.
On March 23, the college lending company announced that the new loan is aimed at saving students money in the long run, as well as reducing the overall time spent paying back the loan.
Patricia Christel, a representative for Sallie Mae, explained that instead of having interest deferred until six months after graduation, students would make monthly interest payments while in school. This would allow the student to pay off the loan in five to 15 years instead of 15 to 30, she said.
In May 2008, Sallie Mae teamed with Gallup and conducted a poll to see how students and parents pay for higher education. The study showed that the average loan amount borrowed by students was $7,694, allowing for monthly payments of around $70 under this plan. The student would save 38 percent more than if they began payments after graduation, according to the study.
According to Sallie Mae’s Savings Example, the average borrower would save close to 60 percent in finance charges, 40 percent more than if they deferred all payment, and would repay the loan nine years sooner.
‘This new loan will enable students to save money, build good credit, and repay their student loan debt faster,’ Christel said. ‘Students avoid negative amortization and graduate with substantially less debt.’
Of the 684 college students interviewed for the study, 23 percent primarily relied on student loans to cover tuition.
Salvatore Freni, a middler international affairs major, said he has always used student loans to pay for school.
‘I think that’d be great,’ he said, referring to the new loan. ‘I’d take advantage of it.’
Hinal Patel, a junior nursing major, echoed his statements.
‘It would be good,’ he said. ‘You wouldn’t have to worry about paying after college. It wouldn’t be as much.’
As further incentive, those who make automatic monthly payments may be eligible for interest rate deductions, Christel said.
Sunish Oturkar, a senior electrical and computer engineering major, said he thinks $70 a month is a price that most students could feasibly pay.
‘Most kids make well over that with their part time jobs, and the incentive of paying less overall and getting rid of debt years earlier would encourage them to put that money aside,’ he said.
Sasha Watson, a senior speech, language and audiology major who borrows from Sallie Mae, did not think the average loan amount was realistic, but agreed with the new approach.
‘It’s a good way to pay the interest because it just builds up. Interest is like another loan itself,’ she said.
Watson has relied on loans throughout her college career. While expressing excitement for the new loan, she raised other issues with student loans in general.
‘I don’t think there should be interest [accruing] until after you graduate,’ she said. ‘To pay loans and interest is a lot, especially today.’
Christel said that Sallie Mae urges the ‘1-2-3 approach,’ essentially tapping all avenues of free aid before borrowing. However, that’s not always as reliable, she said.
‘Scholarships should be easier to get, and federal aid is so hard to get,’ Watson said.
The Smart Option loan will be available for the 2009 ‘- 2010 school year and will be awarded based on students’ current Sallie Mae private loan balance, grade level and credit standing. The approval process will also involve a review of monthly income and other payments.