Sallie Mae unveils 2 ways to save for college
Sallie Mae, the nation's largest lender of college student loans, has just unveiled two ways to save: certificates of deposit and an FDIC-insured, online savings account. Let me quickly review the details on what Sallie Mae is offering.
Item #1: Certificates of deposit: Sallie Mae announced March 2 that it will now be offering certificate of deposits with no minimum deposit, no monthly fees and, they say, no hidden charges. In terms of the time involved, it's a pretty painless way to invest in a college education. Got questions about just how this works? Access Sallie Mae's FAQ page.
Item #2: Online savings account. Sallie Mae also debuted a new FDIC-insured, high-yield online savings account. How high? Well, it's currently a 1.35% annual percentage yield, which sounds small, but that's five times the national average, according to the Sallie Mae press release and their source of information: Bankrate.com's October 2009 Passbook & Statement Savings Study.
And there's more to like: no monthly fees, daily compounded interest and no minimum balance. If you haven't started saving for your children's college years, and the whole idea overwhelms you, this seems like a pretty painless way to go. All you need is a checking account, some money and the ability to work a computer mouse.
And if you're already enrolled in Sallie Mae's Upromise program, you can transfer any saved money to the online savings account. If you're not up to speed on what Upromise is, here's the elevator speech: Upromise is an American company that opened its doors in April 2001 with a novel way of saving money for college. By spending money at retailers who had partnered with Upromise, a small portion of that money goes into a Upromise account to be used for to pay for college. (To find out more, click on the Upromise link above.)
Of course, this is a good deal for the retailers, too, who hope that their partnership with Upromise obliges you to spend your hard earned money with them.
Anyway, Upromise, which was purchased by Sallie Mae a few years ago, is now in sync with Sallie Mae's savings account. Upromise spokeswoman Debby Hohler told me that as long as you have at least $10 saved in a Upromise account, you can automatically transfer it into the Sallie Mae account. Customers who have a savings account balance of $5,000 or more, or those with a monthly automated savings plan of $25 or more a month, might qualify for an annual match of 10% of their prior year's Upromise rewards.
So there you go. None of this may make saving for college a dream come true -- who's going to really get excited about saving until they come up with "pre-loaded with money" savings accounts -- but the lack of fees, the relatively high interest rate and the ease of setting all this up make this worth checking out.
Geoff Williams is a regular at WalletPop. He is also the co-author of the new book "Living Well with Bad Credit."