Government Study Finds College Financial Aid Offer Letters Unclear and Confusing
The Government Accountability Office confirms financial aid offer letters leave families confused about the true cost of higher education. This needs to change.
A recent study by the federal Government Accountability Office (GAO) found that 91% of colleges and universities understated or did not include a net price — the amount a student pays after scholarships and grants — in their financial aid offer letters. In addition, many financial aid offers don’t itemize costs such as tuition, fees, housing, books, and transportation, which lead to surprise expenses for families and makes budgeting difficult.
These “award” letters, which colleges and universities send to accepted students each year, outline their eligibility for scholarships, grants and other aid to attend that institution and are critically important for students and families evaluating costs.
There is no standard format for how this information is presented, leaving too many families confused about the true cost of college and what type of aid they qualify for. Establishing a universal offer letter would be a good step toward providing clarity and transparency.
The same GAO study found some offer letters do not clearly identify funds that need to be repaid like federal student loans and work-study. Several offers also subtract Parent PLUS loans – federal loans made to parents with minimal credit checks and no reasonable borrowing limits – from the total cost of attendance.
The report notes just how misleading this can be: “Subtracting this type of loan from the cost of attendance can drastically underestimate the amount a student’s family will need to pay for college.”
Taken all together, families can’t make smart financial decisions if they don’t have a transparent and complete overview from colleges of the costs they’ll pay.
Reform Is Needed
The GAO report concluded, “further congressional action would be necessary to ensure that students receive the information they need in their financial aid offers to make informed education and financial choices.”
Creating a universal offer letter — that clearly calls out the net price and itemizes direct costs — would be a critical step in making the higher education financing system more transparent, ultimately helping students and families make more informed decisions about what school to attend and how to pay it and prevent overborrowing.
To help set students and families up for success to, through, and immediately after college, we’ve broken down what to expect in an offer letter and what it can mean for their future.
POP Quiz: How much do you know about higher education financing?
Sallie Mae’s 1-2-3 Approach to Paying for College
Figuring out how to pay for higher education can be stressful and complicated. Follow our three-step approach to simplify the process:
1. Start with money you don’t have to pay back.
Consider any savings or income you can put toward your tuition.
- Savings: In addition to tapping current income, consider a tax-advantaged account like a 529 plan or goal-based savings account that can be used to cover education costs.
- Scholarships: Millions of scholarships are available for incoming and current college students. Sallie Mae’s free Scholarship Search Tool can help you find the scholarships best suited for you.
- Grants: Colleges, states, and the federal government provide funds to students based on need. Complete the Free Application for Federal Student Aid (FAFSA) early to maximize your chances of receiving grants.
- Work-study: These part-time jobs allow students to earn income while in school. Make sure to submit your FAFSA to be considered for work-study programs.
2. Explore federal loans.
Federal loans are made by the government, available to everyone without assessment of ability to pay them back, are taxpayer funded, and most need to be paid back with interest. Students can apply by completing the FAFSA.
3. Consider a responsible private loan.
Private student loans can bridge the gap between income and savings, scholarships, grants, federal aid, and any remaining higher education costs.
Private student loans are credit-based and underwritten, meaning the lender assesses the student’s ability to afford a loan before approving it.
Because most students do not have significant credit profile, majority of private student loans require a cosigner to qualify.
Like the majority of federal student loans, private student loans need to be repaid with interest.
Sallie Mae encourages students and families to start with savings, grants, scholarships, and federal student loans to pay for college.
For more information, visit SallieMae.com/CollegePlanning
Putting it in Perspective: Sallie Mae’s Role in Higher Education
Student loan debt on the rise.
The amount of outstanding student loans in the U.S. has been on the rise for years, and it reached a record-breaking high in 2022 at $1.7 trillion. This is more than a four-fold increase since 2005, when student loan debt totaled $391 billion.
Federal v. Private: What’s the difference?
The federal government is the largest provider of student loans. In fact, the government holds about 93% of all student loan debt, meaning fewer than $1 in $10 of student loan debt is owed to private lenders. Private student loans, like those originated by Sallie Mae, are recommended as supplemental support for students and families who have financed the bulk of their education with income, savings, scholarships and grants, and aid from the federal government.
How does Sallie Mae Help?
With Financial Planning Calculators for Students & Families
Paying for higher education should be simpler and students and their families should be informed, understanding loan choices and how repayment works before committing to a loan. Sallie Mae’s easy-to-use online financial planning tools and resources make it clear how the choices students make today can affect their lives tomorrow. In 2020, Sallie Mae helped more than 420,000 students and families finance their education, and that lending philosophy is working: Roughly 9 in 10 of Sallie Mae loans in repayment are paid on time.
With Free Scholarship Search Tools
In the 2021-22 academic year, 60% of families used scholarships to pay for college, according to the 2022 How America Pays for College report. Sallie Mae provides a free scholarship search tool, helping students and families find more free money to pay for college. The tool opens the door to more than 6 million scholarships worth up to $30 billion.
By Making Applying for the FAFSA Easier
In 2021, 62% of families said they would definitely or probably submit the FAFSA®, the Free Application for Federal Student Aid, but only 20% reported feeling prepared, according to the 2022 College Confidence: What America knows about paying for college report. Sallie Mae offers a comprehensive FAFSA application guide that simplifies the process to complete and submit the form, opening the door to $112 billion in federal funding, such as grants and scholarships.
FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid
The Sallie Mae Fund and Thurgood Marshall College Fund Announce $100,000 in Scholarships to 10 Graduate Students
Since 2021, Sallie Mae, through its charitable arm, The Sallie Mae Fund, has partnered with Thurgood Marshall College Fund to award scholarships to help students from all backgrounds access and complete higher education. The Sallie Mae Fund’s Bridging the Dream Scholarship for Graduate Students provides $10,000 to 10 deserving graduate students who plan to use their degree to advocate for social justice and support their communities.
This year’s scholarship recipients are enrolled in Historically Black Colleges and Universities, state colleges, and Ivy league universities and were selected from nearly 500 applicants. They are aspiring doctors, nurses, educators, engineers, and social workers, with diverse and unique backgrounds.
In many cases, these diverse and deserving recipients have shown tremendous resiliency and have overcome a variety of obstacles that too often can put higher education out of reach – whether it be a first-generation student or coming from historically marginalized communities, and in some cases, both.
Congratulations to the 2023 recipients of The Sallie Mae Fund and Thurgood Marshall College Fund Bridging the Dream Scholarship for Graduate Students!
2023 Bridging the Dream Scholarship for Graduate Students Recipients
Hometown: Apopka, FL
College: Florida A&M University
Program: Master of Public Health
Marcela Dos Santos
Hometown: Irvine, CA
College: University of California—Irvine
Program: Doctor of Nursing Practice, FNP
Hometown: Ellicott City, MD
College: James Madison University
Program: Master of Psychology
Hometown: Bronx, NY
College: Columbia University
Program: Master of Science, Mechanical Engineering
Hometown: Rose Hill, VA
College: James Madison University
Program: Master of Education
Hometown: Oklahoma City, OK
College: Langston University
Program: Master of Science, Rehabilitation
Hometown: Doerun, GA
College: Savannah State University
Program: Master of Public Administration
Hometown: Anaheim, CA
College: UCLA, David Geffen School of Medicine
Program: M.D. Doctor of Medicine
Hometown: Toledo, OH
College: College of Medicine and Life Sciences, University of Toledo
Program: Doctor of Medicine
Hometown: Santa Maria, CA
College: University of Massachusetts—Global
Program: Master of Social Work
The Bridging the Dream Scholarship Program is part of a three-year, $3 million commitment made by The Sallie Mae Fund to open doors of higher education to students from all backgrounds, including those from underserved or underrepresented communities. To date, more than 600 scholarships worth $2 million have been awarded to help students access and complete their education.
In addition to the Bridging the Dream Scholarship for Graduate Students, Sallie Mae offers a free online Graduate School Scholarship Search tool, which provides access to 950,000 graduate school scholarships valued at more than $1 billion.
Applications for the Bridging the Dream Scholarship for High School Seniors will open on February 6, 2023.
Sallie Mae Q&A: Your College Financing Questions Answered
It’s time to talk. Americans owe $1.7 trillion in student loans – and roughly 93% of that debt is made and held by the federal government.
Higher education lays the foundation for future success, and loans can help make those successes and dreams a reality. But responsible repayment begins with responsible lending – that’s where Sallie Mae® comes in. We clarify the complex world of college financing and help students achieve their education goals. How? Let’s start at the beginning…
How much do students typically rely on loans to pay for college?
College financing looks different for everyone and not everyone borrows to pay for college. In fact, roughly 45% of bachelor’s degree recipients from public and private non-profit four-year colleges graduated with no student debt, according to College Board.
According to Sallie Mae’s How America Pays For College report, in the 2021-22 school year, families reported spending an average of $25,313 on college, with borrowed money like loans covering 18% of that. Family income and savings covered over half of these total costs and scholarships covered another quarter.
We believe that responsible borrowing begins with responsible lending, and that we’re only successful when our students are. This approach has proven enormously successful for our borrowers.
How do students pay for college?
Students and families pay for college through a combination of income and savings, scholarships, grants, and loans. After maximizing money that doesn’t need to be paid back, such as scholarships and grants, the next step in the college financing process is to fill out the Free Application for Federal Student Aid (FAFSA®). The FAFSA opens the door to federal, state, and school-based financial aid, including scholarships, grants, work-study, and federal student loans. After completing the FAFSA and evaluating financial aid offers from schools, if families need more to cover remaining costs, they can apply for credit-based private student loans to fill the gap. Private lenders like Sallie Mae will look at creditworthiness and repayment history before approving loan applications.
How does Sallie Mae help?
Sallie Mae is best known as a private student loan lender, but as an education solution provider, we make it easier to understand, plan for, and finance higher education. We believe higher education should be affordable and accessible.
We offer several free resources like planning calculators and scholarship searches that help students build their plan – and pay for college – with confidence. If families need more to cover remaining costs, we offer credit-based private student loans. Lending responsibly also means assessing the ability to repay before a loan is approved. In fact, roughly 9 in 10 of Sallie Mae private student loans in repayment are being paid on time.
Is Sallie Mae part of the federal government?
No. Sallie Mae is a private student lender – we offer private, credit-based loans.
Our name has been around for decades, but the company we are today is fairly new. Sallie Mae stopped originating federal student loans in 2010. Today, we exclusively offer private student loans. Even before we offer a private student loan, we help student and families build an effective and responsible plan to pay for college with a three-step approach. We advise them to start with free money and then explore federal student aid before considering a private loan.
What’s the difference between federal and private student loans?
The federal government is the largest provider of student loans, holding roughly 93% of all student loan debt. Federal student loans are made to all eligible students who apply for them; they are issued directly to students, without underwriting.
Private student loans, on the other hand, are originated by credit unions, state agencies, and banks like Sallie Mae. Private student loans make up about 8% of all student loans. They are recommended as supplemental support to students and families who have financed the bulk of their education with income and savings, scholarships and grants, and federal aid. Private student loans are made to students, often with a cosigner, and require an evaluation of creditworthiness before they’re issued.
What is a federal Parent PLUS loan, and how is it different from other federal student loans?
Federal Parent PLUS loans are made to students’ parents rather than to students themselves. Unlike federal student loans, federal PLUS loans are unlimited up to a school’s full cost of attendance, minus any financial aid the borrower’s child has already received. These loans do require a basic credit check.
Federal Parent PLUS loans come with higher origination fees and higher interest rates than other federal student loans. Additionally, repayment for these loans can begin right away. These factors, in conjunction with the unlimited nature of PLUS loans, mean that they can be difficult to pay back.
When and how do students start paying back loans?
Federal student loans are either direct subsidized loans, direct unsubsidized loans, or direct PLUS loans. Federal student loans are available to any eligible student who completes the FAFSA; they are not underwritten and do not assess the ability to repay. Depending on the loan, students can make payments while in school or defer payment until after college although interest will accrue during this time. Many federal student loans offer income-based repayment plans, which allow qualifying borrowers to make monthly payments based on a percentage of the borrower’s salary after college.
If families need more to cover remaining costs, private lenders like Sallie Mae offer credit-based student loans to fill the gap. When students are approved for a private loan, they can choose either a fixed or variable interest rate and from a variety of in-school repayment options that determine how much principal – the original loan amount – and how much interest is paid back each month. Sallie Mae pioneered the option of making small or interest-only in-school payments to reduce total debt and keep overall balances down. More than half of our customers choose to do this. In fact, choosing an in-school payment option may also lead to a more effective interest rate. Students can also choose to defer until six months after leaving school.
It’s critical that students understand their loan and repayment options before making the commitment. That’s why Sallie Mae provides resources and tools for students and families to help them navigate the college financing process. We conduct routine communication with students about their loans while they are in school, long before their first payment is due and provide annual student loan snapshots to help them understand how much they owe and what strategies they can implement to help them pay down faster.
Who Sallie Mae Is — and Isn’t
We’re in the business of providing responsible financial tools – and financial literacy
The Sallie Mae® of today might surprise you. We’re no longer a government student loan servicer — in fact, we’re a completely different business and have been for nearly a decade. Today, we’re a bank and education solutions provider with free college planning resources and financing, such as private student loans, to students and their families.
Sallie Mae is not a federal loan servicer.
The name Sallie Mae has been around since the ‘70s, but the company who uses the name today is actually pretty 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 took the name and became a 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 2022, $1.59 trillion – or about 93% – was made and held by the federal government. The remaining roughly 8% 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, and we’re committed to making that a reality. 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 used to guide students and their families through all of their options. The first step is to find money you won’t have to pay back, or ‘free money’, such as scholarships and grants. The second step is to explore federal student loans by filling out the Free Application for Federal Student Aid (FAFSA®) and gaining access to more than $110 billion in federal aid available through the government.
And our responsible lending approach works. In 2020 alone, Sallie Mae provided support to more than 420,000 students and families seeking financing for college and graduate studies. In addition, roughly 9 in 10 of Sallie Mae’s private student loans in repayment were managed on time.
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 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 are available for free on our website.
Examples of our tools include:
- A free scholarship search tool, home to more than 6 million scholarships collectively worth $30 billion, that matches students with scholarships based on their skills, activities and interests. We have a version for graduate students, too, home to more than 950,000 scholarships worth up to $1 billion.
- 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 student loan payment amount estimator.
- Our Bridging the Dream Scholarship Program, through our charitable arm, The Sallie Mae Fund, in partnership with Thurgood Marshall College Fund, provides millions of dollars to support access and completion for students from underserved communities.
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 all. 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, we’ll provide responsible options that power them throughout their unique journey.
FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid
A Higher Education Can be Transformative, So Let’s Make Sure Students From All Backgrounds Have That Opportunity
Higher education opens the door to more opportunities. But not all students – especially those from underserved and marginalized communities – have the same resources or support to achieve their college dreams. Read from Sallie Mae EVP Nic Jafarieh about how Sallie Mae provides tools and resources to level the playing field for all students and families to access and complete higher education.
What Students and Families Need to Know About The FAFSA
Each year, the Free Application for Federal Student Aid (FAFSA®) opens the door for students and families to more than $112 billion in scholarships, grants, state-aid and federal financial aid, and provides information to schools to create financial aid packages. Yet too many families skip completing the FAFSA altogether due to misconceptions about eligibility or a lack of support to complete the form.
According to Sallie Mae’s How America Pays for College 2022 report, while October marks the beginning of the FAFSA® application window, only one-quarter of undergraduate students and parents are aware of that. Additionally, the College Confidence: What America Knows about Paying for College 2022 report found that only 62% of families with college-bound students plan on completing the form and just 32% of students who will be the first in their family to attend college plan on submitting the FAFSA®. Moreover, just 20% of these students feel prepared to complete the FAFSA®.
Here are five important things to know about the FAFSA®:
1. All students — regardless of family income — should complete the form.
Nearly four in 10 families (36%) said they bypassed the FAFSA® because they believed their income was too high to be eligible, according to the College Confidence report. The reality is, just about every family will qualify for some form of aid. Some of that aid, like scholarships, grants, and state-based aid is offered on a first-come, first served basis so the sooner families can get in line – as close to the Oct. 1 open date for the FAFSA each year – the better.
2. There is no fee to submit the FAFSA®.
Families should never pay to submit the FAFSA®. Filing is free, period. A paid service will not get students more aid. Sallie Mae provides students with free resources to help them fill out their application properly, 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 grad school – should complete the FAFSA® every year they are in school. That said, sometimes income and other factors may change due a job loss, medical circumstance, or impact of broad scale events like the COVID-19 pandemic. That’s when completing a “special circumstances” form may make sense. The form is available from college financial aid offices and can be helpful in receiving additional aid in these situations.
4. List schools on the FAFSA® even if it’s not a final list.
If students don’t list any colleges on their FAFSA®, then the schools won’t know the student is potentially interested in applying for grant money from them. Students should 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!
Submitting the FAFSA® is one of the critical first steps students and families can take to pay for college, and can help make college more affordable. For help filling of the FAFSA®, check out this comprehensive step-by-step guide.
The Sallie Mae Fund and Thurgood Marshall College Fund Award $250,000 in Scholarships to 25 High School Students
Twenty-five diverse and deserving students from across the country received $10,000 to help pay for their higher education through Sallie Mae’s Bridging the Dream Scholarship for High School Seniors. This year’s recipients excel inside and outside the classroom and are attending a diverse set of institutions – state colleges, ivy league universities, and Historically Black Colleges and Universities. Many of the recipients are also from underrepresented or historically underserved communities who often need additional support to access higher education.
The Bridging the Dream Scholarship program is part of a $3 million commitment made by The Sallie Mae Fund – in partnership with Thurgood Marshall College Fund – to open doors of higher education for students from all backgrounds.
In addition to The Bridging the Dream Scholarship for High School Seniors, Sallie Mae also offers The Completing the Dream Scholarship, and The Bridging the Dream Scholarship For Graduate Students. Sallie Mae’s free Scholarship Search tool is also home to more than 6 million scholarships collectively worth $30 billion.
Meet the 25 outstanding students.
2022-2023 Bridging the Dream Scholarship Recipients
Hometown: Brooklyn, NY
College: North Carolina A&T State University
Major/Minor: Biology, Psychology
Fun Fact: First person in her family to graduate high school and attend college
Hometown: Hamilton, MT
College: University of Montana Western
Fun Fact: Won multiple rodeo titles and wants to specialize in equine dentistry
Hometown: Avon, IN
College: Ball State University
Major/Minor: Fashion Merchandising and Business
Fun Fact: Wants to be an entrepreneur and create a platform for the Black community to discuss mental health
Hometown: Clarksville, TN
College: Middle Tennessee State University
Major/Minor: Speech-Language Pathology
Fun Fact: Wants to make a difference in the speech-language pathology field, as only 3% of audiologists and speech-language pathologists are African American
Hometown: Katy, TX
College: Prairie View A&M University
Major/Minor: Digital Media Arts
Fun Fact: Wants to pursue a career in design, either in animation or video game development
Hometown: Smyrna, DE
College: University of Delaware
Fun Fact: Passionate about raising awareness about the school to prison pipeline, and wants to fight for justice in the courtroom one day
Hometown: Racine, WI
College: University of Wisconsin—Whitewater
Major/Minor: Pre-Veterinary, Biology
Fun Fact: Has wanted to become a vet since she was three
Hometown: Conyers, GA
College: North Carolina A&T State University
Major: Pre-Medicine, Biology
Fun Fact: Wants to become a pediatric doctor, and joined the Minority Association for Pre-Medical Students (MAPS)
Hometown: Paramus, NJ
College: Seton Hall University
Major/Minor: Pre-medicine, Biology, Medical Humanities
Fun Fact: Wants to pursue a position in the medical field and help people in third-world countries
Hometown: Florissant, MO
College: Jackson State University
Major/Minor: Civil Engineering
Fun Fact: In the marching band
Hometown: Citrus Heights, CA
College: Louisiana State University
Major/Minor: Business Management
Fun Fact: Wants to pursue a career in entrepreneurship and sports entertainment marketing
Hometown: Lindenhurst, NY
College: Columbia University
Major/Minor: Political Science
Fun Fact: Advocates for Black adolescent mental health and founded her own GenZ magazine
Hometown: Jacksonville, FL
College: University of North Florida
Major/Minor: Graphic Design
Fun Fact: First-generation immigrant from Cameroon
Hometown: Schuyler, NE
College: University of Nebraska—Lincoln
Fun Fact: Becoming a certified personal trainer
Hometown: Burkburnett, TX
College: Midwestern State University
Fun Fact: Wants to become a pediatric nurse practitioner
Hometown: Richmond, VA
College: North Carolina A&T State University
Fun Fact: Wants to own her own physical therapy practice to help people like her brother, who is autistic.
Hometown: Fort Washington, MD
College: Bowie State University
Major/Minor: Finance, Accounting, Computer
Fun Fact: Wants to become a CEO of a technology company or bank, and help his community by creating a financial literacy tutoring program and opening a gaming and computer lab
Umulkheir Sharif Ali
Hometown: San Diego, CA
College: University of San Diego
Major/Minor: Psychology, Biomedical Ethics
Fun Fact: From Kenya, and wants to become a physician’s assistant to help underserved communities
Hometown: Whitsett, NC
College: North Carolina A&T State University
Major/Minor: Public Relations
Fun Fact: Wants to start a photography business on the side to support himself through college
Hometown: Charlotte, NC
College: North Carolina Central University
Major/Minor: Psychology, African American Studies
Fun Fact: Wants to become a well-renowned therapist with her own practice, focusing on supporting mental health in the African American community
Hometown: Verona, PA
College: University of Pittsburgh
Major/Minor: Pre-law, Law and Society, Spanish and Film and Media Studies
Fun Fact: Has several creative hobbies including writing, photography and film that she would like to combine with law to enrich the Black community and cultivate Black minds
Hometown: Chicago, IL
College: University of Michigan—Ann Arbor
Major/Minor: Engineering, Computer Science
Fun Fact: Part of the Society of Women Engineers, the National Society of Black Engineers and the Black Students Union
Dora De La Cruz-Martinez
Hometown: West Liberty, IA
College: St. Ambrose University
Major/Minor: Pre-Law, Spanish
Hometown: Burlington, NC
College: Savannah State University
Major/Minor: Forensic Biology, Criminology
Hometown: Cincinnati, OH
College: Tennessee State University
Major/Minor: Computer Science