Put simply, the federal student loan system is broken.

The government lends nearly $86 billion in federal student loans each year, yet the system too often fails the people it was designed to help.  The availability of unlimited federal loans has helped drive significant tuition increases for both undergraduate and graduate students. At the same time, a complicated application process to apply for scholarships, grants, and other federal aid, and confusing financial aid offers leave too many students bewildered and at risk of overborrowing from the federal program. 

Students, families, and taxpayers deserve a better, more transparent system that works as it was originally intended – to support those who truly need taxpayer-funded assistance to access and complete higher education. Reforming the system and addressing the cycle of ever-growing federal student loan debt will require collaboration among higher education leaders and stakeholders.

Sallie Mae is committed to driving meaningful change by promoting a more transparent system.

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Three Recommendations for Reform

1. Focus Resources on Those Who Need the Most Support

Access to higher education remains uneven. The federal student loan program continues to do too much for too many and not enough for those who need the most support. Too often, students from underserved or underrepresented communities – many of whom are first-generation college students — lack tools and resources needed to make well-informed, confident decisions about paying for their higher education.

We support meaningfully expanding the Pell Grant for low-income students, which could increase college enrollment and retention. And we need to make it easier for them to apply. In 2023, more than $4 billion in Pell Grants went unclaimed, money that could have put higher education within reach of students who need it most.

In addition, the problems that plagued the Free Application for Federal Student Aid (FAFSA) need to be solved before the next round of applications. This year’s fumbled rollout made the already complex process of applying for federal financial aid even more confusing. Likewise, financial aid offers from schools should also be clearer and more transparent so that families understand the true cost of college and how much they will ultimately need to pay.

To do our part, we offer all students and families access to free college planning tools including a free scholarship search tool and step-by-step FAFSA guide.

2. Empower degree completion

Access to college on its own is not enough – higher education stakeholders need to focus attention and resources on prioritizing college completion just as much as college access.

Far too many students take on debt without earning a degree. In fact, more than 40 million Americans have some college education but no degree. Too often, they are first-generation students and those from underserved communities.

In addition, roughly six in 10 students who start college graduate in six years.

Research consistently shows financial issues, life changes, and mental health concerns are some of the barriers that keep students from graduating.

Often small debts, overlooked bills, or expenses get in the way of completion. To address that issue, we created our Completing the Dream Scholarship in partnership with Thurgood Marshall College Fund.

We’ve partnered with HBCU Delaware State University (DSU) to help close the college completion gap. Our $1 million research endowment to Delaware State University funds a comprehensive three-year “Persistence and Completion Pilot Program” to study and understand barriers to college completion and help students return to school to complete their degrees. The research will help advance policy recommendation and best practices that enhance student re-engagement at DSU, HBCUs, and other institutions nationwide.

3. Address college costs and limit overborrowing.

Americans hold $1.77 trillion in student loan debt as of the second quarter of 2023, up 1.25% year over year. Of that total, roughly 93% are federal student loans. The remaining 7% are private student loans, which are credit based and underwritten by private lenders, including Sallie Mae who assess ability to repay before making a loan.

Unlimited federal lending programs have driven increases in tuition as students and parents borrow more than ever before to pay for higher education. Common sense reforms to these programs would protect families from taking on more than they can afford to repay and also encourage students to consider all educational options, bending the curve of rising college costs.

We’re in the business of promoting responsible borrowing and supporting students with free tools and resources to power confidence on their unique journeys.

The Sallie Mae® of today might surprise you. We’re not a government student loan servicer — in fact, we’re a completely different business and have been for more than a decade. We’re an education solutions company, providing students and families with free college planning resources and responsible private student loans to cover any gaps in financing after income and savings, scholarships, grants, and other federal financial aid.   

Sallie Mae is not a federal loan servicer.

The name Sallie Mae has been around since the ‘70s, but today’s Sallie Mae is relatively new.

When Sallie Mae first formed, it was a government-sponsored enterprise servicing federal student loans — or loans made by the government. But in 2014, it split into two separate companies. The Sallie Mae of today, however, is an education solutions company and consumer banking business. The other company became Navient. Importantly, the two companies are independent and not associated with one another.

Of the $1.7 trillion outstanding student loan debt in 2023, $1.6 trillion – or about 93% – was made and held by the federal government. The remaining – roughly 7% of student loan debt – was held by numerous private lenders, including Sallie Mae.

Sallie Mae is in the business of fair and responsible lending.

Sallie Mae’s approach is shaped by our responsible lending philosophy — that students and families should not be overburdened with loans that they won’t be able to repay. Simply put, students shouldn’t pay more for college than necessary.

We believe that higher education should be affordable and accessible.  Private student loans should be used to fill the gap between resources available to students and the remaining cost of college, and not as a first resort.

In fact, taking out a private loan is the last step of our three-step approach to paying for higher education. The first step is to find money that doesn’t need to be repaid, or “free money,” such as scholarships and grants. The second step is to explore federal financial aid by filling out the Free Application for Federal Student Aid (FAFSA®) and gaining access to more than $111 billion in federal aid available through the government. If there is a remaining financing gap, then a private student loan may be an option.

Our responsible lending approach works. On average fewer than 3% of our loans in repayment default annually.

Sallie Mae is committed to helping students succeed.

Providing responsible financing is just one part of how Sallie Mae achieves its mission of powering confidence for students and families navigating their unique journeys to, through and immediately after college. Our goal is to help families make informed decisions about higher education and complete their degrees, which is why we provide free financial planning tools for anyone to use, whether they’re a Sallie Mae customer or not. 

We guide students and their families by emphasizing financial literacy from day one — before they even take out a loan. Our array of tools and resources to help students effectively plan and pay for college is available for free on our website.   

Examples of our tools include:

• A free scholarship search tool – Scholarship Search by Sallie helps connect students to scholarships based on their skills and interests.
• We provide a variety of college planning tools and calculators to help customers understand how to best save and pay, including a college cost calculator, college planning calculator, and a step-by-step FAFSA guide.
• Through our charitable arm, The Sallie Mae Fund, we provide millions of dollars in scholarships to support access and completion for students from underserved communities. By the end of the 2023-2024 academic year, we will have awarded approximately $3 million in scholarships through this program, in partnership with Thurgood Marshall College Fund.  

If students do decide to take out private student loans with us, we want to make sure they’re informed. We provide clear communications regarding their choices, including the option for undergrad and grad students to make payments while in school. Roughly half of Sallie Mae customers go this route, which helps save on the total cost of their student loans. We also provide consistent communication regarding their loans, including an annual statement detailing what they owe.

We know that financing higher education is complex and confusing, but Sallie Mae is here to make sense of it.  That means ensuring students and families feel confident and informed about how to plan and pay for higher education, and if they need to borrow, providing responsible options to power them throughout their unique journey.

FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid