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

From rising college costs to the fumbled rollout of the new Free Application for Federal Student Aid (FAFSA®), the federal higher education financing system is in need of comprehensive reform.

Read more from Nicolas Jafarieh, Sallie Mae’s Executive Vice President, on creating a simpler, more transparent federal higher education financing system that increases access and affordability, promotes college completion, and supports responsible financing.

After years of studying and working hard, millions of college graduates across the nation are transitioning from college to the next chapter of their lives. This could mean new jobs, new cities, or new goals — a cause for celebration. 

Even after students finish college, the learning doesn’t stop. Next on the syllabus is setting and maintaining a healthy budget, and for those who borrowed to pay for college (41% of students, according to our “How America Pays for College 2023” report), that budget will soon include paying back student loans.

To ensure students get started on the right track, Sallie Mae® works to remove the element of surprise from loan payments by initiating clear communication with students and cosigners while they’re in school and throughout the life of their loans. As a responsible private lender, we believe that transparency and clarity about how much students and families owe and when they need to pay back their loans is critical to helping them responsibly plan for higher education. 

Staying up to date on student loan status

Students have very busy schedules, which is why we make it as easy as possible for them to stay up to date on the status of their loans. Students can create an online account or download the Sallie mobile app to get notifications of when their upcoming payments are due. They can even enroll in auto-debit to ensure their payments are always on time, which can also save them money by lowering their interest rate.

We also send students and their cosigners a loan summary each year they are in school, including interest accrued. This is especially important for customers who choose to defer payments on their loan during college, as it helps them keep track of what they’ve borrowed and what they owe. That said, roughly half of our customers choose to make a fixed payment or pay interest on their loans while in school, which can significantly lower the total cost of the loan.

Tools and tips for the six-month separation period

Sallie Mae private student loans come with a six-month separation or grace period for undergraduate programs that begins once a student leaves school, giving them time to find a job and get settled into post-college life. We let students know at the start of their grace period what their estimated payment amount will be and provide tips on when, where, and how to pay on time.

We also offer free tools to help students prepare for repayment, such as a monthly budget worksheet, which helps students create a budget to meet their financial goals and our student loan repayment calculator that gives students an estimate for their upcoming monthly payments.

At the end of the day, preparation is key to responsible financial planning. From the moment students take out a loan through the months post-graduation, we help students and families not only meet their loan payments, but make strides toward their financial goals.

While getting into college is no small feat, it’s getting the degree that will really help students achieve their dreams. But, as many students are realizing, graduation is not a given.

To better understand barriers to college completion and what helps students graduate, Sallie Mae and Ipsos released the latest research report How America Completes College 2024. The report also serves as a companion to How America Pays for College, the company’s annual research on how families plan and pay for higher education.

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Surveyed:

1,029 adults (ages 18-30) currently enrolled in a two- or four-year program

427 adults (ages 18-30) who started two- to four-year programs but did not complete them

The study categorizes students into three distinct groups: those “on track” for graduation; those who have never contemplated leaving school; those “at risk” of leaving or facing dismissal; and “non-completers,” adults under the age of 30 who started college but left without obtaining a degree or completing their program.

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Non-Completers

One in four current undergraduate students say they are at risk of non-completion, and 57% of students at risk of not completing come from low-income households.

At-Risk Students

73% of on-track students were always committed to attending college, compared to 44% of at-risk students. At-risk students are nearly three times more likely to have transferred schools compared to on-track students and are also more likely to come from diverse backgrounds, including being Hispanic, Black, and part of LGBTQIAA+ communities.

Having a plan to pay for all four years of college before enrolling is linked to student graduation rates. See how Sallie Mae helps students plan for college. Students who know what degree or career path they want to pursue are more likely to stay in school.

There is a strong link between mental health and leaving college, and increased mental health challenges highlight the need for more support and resources for all students.

First-Generation Students

First-generation students are twice as likely (41%) to have seriously considered leaving college compared to students from families with college experience (18%). Although 88% of first-generation college students believe college is an investment in the future, they face significant barriers to college completion.

*compared to just one quarter (25%) of on-track students who are working while in school.

Students need support not only to access, but complete higher education. Especially for first-generation students and those from underserved communities, early college planning is critical. By developing programs and resources that support college completion, simplifying the college transfer process and expanding Pell Grants to apply to short-term training programs, policymakers, institutions and higher education stakeholders can help more students finish their degree.

Students and families borrow nearly $100 billion from the federal government annually

Each year, students and families borrow nearly $100 billion from the federal government for higher education. Many times, they’re borrowing more than they need to, and often more than they are able to repay.

In the 2021-22 academic year, 49% of bachelor’s degree recipients from public four-year institutions graduated with an average federal debt level of $20,700 per borrower, found College Board’s 2023 Trends in College Pricing and Student Aid.  According to Sallie Mae’s How America Pays for College report, students during the 2022-2023 academic year borrowed an average of $11,337 and parents $13,507 to pay for higher education, an increase of 21% and 25%, respectively, over the previous year.

Programs that allow unlimited loan amounts, complex applications for financial aid, and confusion over eligibility for grants and scholarships all contribute to overborrowing.

Here are three ways to help address overborrowing:

Encourage Students to Start with Grants and Scholarships

Each year, the Free Application for Federal Student Aid (FAFSA®)* opens the door to more than $100 billion in grants, scholarships, state-based aid, federal student loans and work-study programs. Still, 30% of families didn’t apply last academic year, including those from low-income families who would be most eligible for free money like scholarships and grants. Many aren’t applying because the form is too complex, they believe their family’s income is too high or they simply lack awareness about the FAFSA. 

Adding to the complications this year are significant glitches and delays resulting from the rollout of a new, streamlined FAFSA. While the intent was to simplify the process and expand eligibility for need-based aid, persistent implementation issues have left students and families frustrated. Still, it’s critical we continue to educate students and families about the importance of completing the FAFSA so they can access free money for college.

Similarly, more than $100 million in scholarships goes unclaimed each year. Too many students and families don’t apply for scholarships thinking they are reserved for top students or athletes, but there are scholarships available for a wide variety of skills and interests. Free resources like Scholarship Search by Sallie simplifies the process, connecting students and families to scholarships.

Standardize Financial Aid Offers

Financial aid offers too often leave families confused about the true cost of higher education, according to a study by the federal Government Accountability Office (GAO). It found 91% of colleges and universities did not clearly state the net price of college — the amount a student owes after scholarships and grants — in their financial aid offers.  

A standardized, transparent offer that clearly itemizes direct costs and fees would help students and families make informed decisions about which school to attend and how much they’re expecting to pay—ultimately helping to avoid overborrowing.

Consider Reasonable Limits for Federal Loan Amounts

Some federal lending programs allow students and families to borrow unlimited amounts to pay for higher education, a policy that has resulted in higher student and parent debt and contributed to the rising cost of tuition.

In fact, unlimited federal government loans have contributed to federal graduate student debt reaching its highest amount ever. According to a recent report by the U.S. Department of Education, the share of students who borrowed more than $80,000 to cover graduate costs increased from 1.4% in 2000 to 11% in 2016.

New America Foundation and the Urban Institute have recommended putting reasonable limits on these federal loans to prevent students and families from borrowing more than they can afford to repay. This type of reform could also slow the exponential growth of college tuition.

These three reforms are important steps toward helping students and families borrow responsibly, while ensuring access to higher education.

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

As a responsible private lender, Sallie Mae advises students and families to explore free money like scholarships and grants before borrowing. The gateway to this aid is the Free Application for Federal Student Aid (FAFSA®), which gives students and families access to $114 billion in scholarships, grants, state-based and federal financial aid. Too many families, however, miss out on this critical aid because of persistent misconceptions about their eligibility or confusion around how to complete the application, resulting in billions of dollars left unclaimed each year.

In fact, about a third of families skipped the form altogether in the 2022-2023 academic year, according to Sallie Mae’s How America Pays for College 2023 report, with 20% saying they had a problem with the application or that it was too complicated. In addition, 72% of families could not identify when the FAFSA® became available. Adding to the complications this year are significant glitches and delays resulting from the rollout of a new FAFSA with fewer questions. While the intent was to streamline and simplify the process and expand eligibility for need-based aid like Pell grants, persistent implementation issues have left students and families frustrated and financial aid offers from schools delayed.

While these delays point to broader issues with the federal financing system for higher education, it’s still critical for families to complete the FAFSA. The FAFSA® is an important first step for students and families to help make college more accessible and affordable. Sallie Mae supports simplification of the FAFSA® and is improving awareness to help more students and families connect to scholarships, grants, and other critical aid.

As an education solutions provider, we provide free tools including a step-by-step FAFSA guide, information,  and webinars to help students and families navigate the new FAFSA and complete it. We also offer free resources like Scholarship Search by Sallie to help students and families find and apply for scholarships.

Here are five important points that students and families should know about the FAFSA®:

1. All students—regardless of family income—should complete the form.

Most families—88%—know to submit the FAFSA® each year so that their school student qualifies for financial aid, but not all families know that every student is eligible to apply. Some families believe their income is too high for their student to qualify for aid, a most frequently mentioned reason why families didn’t submit the FAFSA® last year.

The reality is all students, regardless of income, should complete the form. Some of that aid, like scholarships, grants and state-based aid, is offered on a first-come, first-served basis. That’s why the sooner families can complete the FAFSA®, the better. And while the FAFSA was delayed in 2023, the release date for the 2025-2026 school year should return to the normal open date of October 1.

2. The FAFSA® is free.

Families should never pay to submit the FAFSA®. Filing is free, period. A paid service will not get students more aid. Sallie Mae offers students a step-by-step guide for navigating the new FAFSA, but they can also check with their high school, local college, and financial aid office for assistance.

3. Fill out the “special circumstances” form when financial information changes.

Students and families—including those attending graduate school—should complete the FAFSA® every year they are in school. That said, sometimes income and other factors may change due to circumstances such as a job loss or medical emergency. That’s when completing a “special circumstances” form may make sense. The form is available from college financial aid offices and can help students receive additional aid in certain situations.

4. List schools on the FAFSA® even if it’s not a final list.

If students don’t list all colleges they’re considering on their FAFSA®, then the schools won’t know the student is interested in applying for grant money from them. Students should also always list state schools first in case they offer additional state-based aid on a priority basis.

5. There is no age limit.

Federal financial aid is just as available to non-traditional students in the 24- to 35-year-old range as it is to students in their late teens and early twenties. There’s no age limit for receiving federal financial aid—so all students and families should apply.

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

Without question, higher education opens doors of opportunity. Americans with some form of college degree typically earn significantly more in their lifetime than those without a degree.

The median lifetime earnings of an American with a bachelor’s degree is $2.8 million; for an associate degree, it’s $2 million. In contrast, those with a high school diploma have $1.6 million in median lifetime earnings, according to a report from Georgetown University.

In the more than five decades since it launched, the Pell Grant has helped low- and middle-income students unlock a path to economic prosperity by providing critical need-based funding that does not have to be repaid. Since 1980, the Pell Grant has helped more than 211.8 million students access — and complete — higher education.

Nearly seven million undergraduate students receive a Pell Grant each year.  At the same time about $3.6 billion in Pell Grant awards went unclaimed last year, meaning students are missing out on millions of dollars of free aid that could support their higher education. 

It’s time to increase awareness of the Pell Grant and enhance it to meet the needs of 21st-century students, many of whom are first-generation college students, from underserved or underrepresented communities, or exploring non-traditional paths to higher education.

Reforms — such as meaningfully increasing the size of the Pell Grant or allowing it to be applied to more programs — could increase access to higher education and limit the potential for overborrowing, as would informing families about the importance of completing the Free Application for Federal Student Aid (FAFSA). A modernized Pell Grant could put more students on a path to long-term success.

Raising Awareness About FAFSA Completion

To receive a Pell Grant, students must first complete the FAFSA. Our research shows that only 20% of families with a student planning to pursue higher education feel very prepared to complete the FAFSA, and only a third of first-generation families plan to submit the form — even while 42% of them agree that more grant aid would make college more affordable.

Recent updates to simplify the FAFSA application have made the application more streamlined. The updated FAFSA may help significantly more students from low-income backgrounds receive Pell Grants and potentially 1.5 million more students receive the maximum amount than previous years, according to recent data from the U.S. Department of Education. Raising awareness about completing the FAFSA is key to helping families unlock more aid for higher education.

Meaningfully Increase Funding

A study from the Center for Budget and Policy Priorities found that boosting the size of the Pell Grant would increase college retention and enrollment rates for low-income students. A separate analysis from the Urban Institute concluded that doubling the Pell Grant maximum amount would lead to higher grant awards for students of color, a change that could help to address decades-old education inequalities.

The Pell Grant was increased by $500 last year, but with inflation and higher costs of living, the increase isn’t significant. Sallie Mae supports meaningfully increasing the Pell Grant to meet the needs of students today.

Policymakers should also consider allowing the Pell Grant to be used for short-term skills training programs, such as coding boot camps or trade schools. Expanding the Pell Grant would help students start a new career more affordably while simultaneously addressing skills gaps.

Supporting Those With The Most Need

Our federal student loan program has been broken for far too long, often impacting those who need the most support. Meaningfully expanding the Pell Grant, and increasing awareness of its benefits and the associated application process, are critical to ensure that the federal higher education financing system does what it was intended to — facilitate access to education for those with the greatest need.

Sallie Mae, through The Sallie Mae Fund, announced a $1 million research endowment to Delaware State University (DSU) to help close the college completion gap. The grant will support a comprehensive three-year “Persistence and Completion Pilot Program” that will identify and study barriers to degree completion, help students return to school and complete, and help develop policy recommendations and best practices to enhance student re-engagement at DSU, HBCUs, and institutions across the country.

Graduation rates at HBCUs remain lower than the national average: nationwide, six in 10 students who start college go on to earn a degree within six years; at HBCUs around 40% do. The number of students who have some college experience, but no degree, is a distressing 40 million. In addition, 19 percent of Black learners — nearly 6.4 million students — had some college experience but no degree. Approximately 3 million are “near completers” who have stopped out mere credits away from degree completion.

The program will create a student-centered and data-focused co-branded white paper that lays out higher education policy solutions to increase degree completion. The paper will uplift diverse student voices who have lived experience leaving college without a degree. Research findings and learnings will be presented at a future DSU HBCU Philanthropy Symposium to offer outcomes and recommend solutions for degree completion that can be broadly considered and implemented at HBCUs and institutions nationwide.

Part of the funding will also scale DSU’s current Near Completer program—created in partnership with Thurgood Marshall College—which identifies students with only some college experience and supports their re-enrollment and degree completion. DSU and Sallie Mae have identified over 900 near-completer students, hundreds of whom the program will look to re-engage. The program will also offer $125,000 in scholarships to help cover financial barriers, such as food and technology insecurities, in addition to tuition, fees and books.  

This partnership reflects Sallie Mae and Delaware State University’s shared commitment to close the college completion gap at HBCUs and provide critical support through research, policy recommendations, and financial aid. 

The partnership was celebrated in December at the 13th Annual Delaware State University Scholarship Ball. At the ball, Sallie Mae CEO Jon Witter noted, “Our mission is to power confidence as students begin their unique journey. We are all about helping students with that journey to, through, and immediately after their higher education experience. This builds community and a culture of dedication to the university, and that lasts for years.”

To commemorate National Scholarship Month, Sallie Mae announced the latest recipients of its Bridging the Dream Scholarship for High School Seniors. The Sallie Mae Fund, the company’s charitable arm, has partnered with Thurgood Marshall College Fund for the last three years to award scholarships to deserving under-resourced and underrepresented students. 

This year’s 27 deserving high school students were awarded up to $10,000 each to access higher education.

The diverse and impressive Bridging the Dream scholarship recipients were selected from more than 1,100 applicants nationwide and a majority are attending Historically Black Colleges and Universities. They are pursuing a diverse range of degrees, including criminal justice, musical theater, social work, engineering, and more.

Meet this year’s outstanding students.

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2023-2024 Bridging the Dream Scholarships Recipients

Milan Rothe

Hometown: Lakeway, Texas

College: Howard University

Major/Minor: Herbal Medicine, African Studies and Business Marketing