Supreme Court Ruling on Federal Student Debt Cancellation Should Be a Wake-Up Call

Education Landscape

Sallie Mae CEO Jon Witter penned an op-ed for The Hill that highlighted a variety of common-sense solutions to constructively address the broken federal higher education system in need of significant and lasting reform that supports students and limits overborrowing.

“If we fail to make significant structural reforms to the federal higher education system, another generation of students and families will inevitably face the same hurdles so many face today. The Supreme Court’s decision is a call for us to come together and work toward meaningful reform,” he wrote.

Read the full piece here.

We Can Break the Cycle of Ever-Growing Federal Student Loan Debt While Protecting Access to Higher Education

Accountability

Let’s put it simply: the federal student loan system is broken.

The government lends upwards of $100 billion each year, yet the system too often fails the people it was designed to help – those who truly need public support to access and complete higher education. 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 that works for students, families, and taxpayers.


Four 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 it most. 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 eligible students and further simplifying the Free Application for Federal Student Aid (FAFSA). These actions would make a significant difference for these students, giving them easier access to more funds. Financial aid offers from schools should also be clear and 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 any and all students and families access to free college planning tools including a scholarship search tool.

2. Empower degree completion, not simply attendance.

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: Roughly six in 10 students who start college graduate in six years. It’s a combination that leaves them struggling financially.

SOURCE: U.S. DEPARTMENT OF EDUCATION, NATIONAL CENTER FOR EDUCATION STATISTICS, 2021

Issues that students struggle with while pursuing their education, such as mental health concerns or housing and food insecurities, are among some of the barriers that may keep students from graduating. More resources should be made available and put in place to address these issues.

Often small debts, overlooked bills, or expenses can also 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’re also exploring opportunities through our charitable arm, The Sallie Mae Fund, to help institutions research and implement new programs to help students complete college.

3. Address college costs and protect against overborrowing.

Of the $1.7 trillion outstanding student loan debt in 2022, $1.59 trillion – or about 93% – is  made and held by the federal government. The remaining – roughly  7% of student loan debt – was held by numerous private lenders, including Sallie Mae. This amount of federal student loan debt is a more than a four-fold increase since 2005, when student loan debt totaled $391 billion.

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.

4. Encourage other forms of higher education.

Attending a four-year college directly after high school has been considered the expected path to higher education, even though many students may be better served at a two-year college or vocational program.

Reform efforts should encourage “non-traditional paths” — all forms of higher education — from community college to short-term training programs. Allowing students to use the Pell Grant for intensive skills courses, for example, would make it easier for people to affordably attend job training programs.

Moreover, colleges and universities should consider providing additional support to non-traditional students, which the Department of Education defines as students who are “independent for financial aid purposes, having one or more dependents, being a single caregiver, not having a traditional high school diploma, delaying postsecondary enrollment, attending school part time, and being employed full time.” At least 70% of students have at least one of these characteristics and they may need additional support, such as access to childcare or more flexible financial aid packages.

Government Study Finds College Financial Aid Offer Letters Unclear and Confusing

Accountability

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 standard offer letter would be a good step toward providing clarity and transparency.

Hidden Costs

The same GAO study found some offer letters do not clearly identify funds that need to be repaid like federal student loans. 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 standard 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?

Financial Literacy

College should be more affordable and accessible for students from all backgrounds, and we’re committed to making that happen by helping families confidently navigate to, through and immediately after college. We power confidence in students and families by providing tools and resources to make informed decisions about higher education.

Test your own college preparedness knowledge by taking the quiz below.

Sallie Mae’s 1-2-3 Approach to Paying for College

Financial Literacy

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.


Borrow responsibly

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

Female Teen Raising Handing During Lecture

Putting it in Perspective: Sallie Mae’s Role in Higher Education

Accountability

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: On average approximately 2% of our loans in repayment default annually.

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 doors to a variety of scholarships based on majors, locations, and even unique interests.

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

Education Landscape

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

Shawnda Williams

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

Angela  Ji

Hometown: Ellicott City, MD

College: James Madison University

Program: Master of Psychology

Tyreece Santana

Hometown: Bronx, NY

College: Columbia University

Program: Master of Science, Mechanical Engineering

Jacqueline Pauley

Hometown: Rose Hill, VA

College: James Madison University       

Program: Master of Education

Tia Briggs

Hometown: Oklahoma City, OK

College: Langston University

Program: Master of Science, Rehabilitation

Denerick Simpson

Hometown: Doerun, GA

College: Savannah State University

Program: Master of Public Administration

Ahmad Elhaija

Hometown: Anaheim, CA

College: UCLA, David Geffen School of Medicine

Program: M.D. Doctor of Medicine

Katherine Esser

Hometown: Toledo, OH

College: College of Medicine and Life Sciences, University of Toledo

Program: Doctor of Medicine

Fabiola Limon

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.

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

Financial Literacy

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 a scholarship search tool 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, on average approximately 2% of our loans in repayment default annually.

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.

Woman and Teen Talking

Who Sallie Mae Is — and Isn’t

Accountability

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 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, 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, on average approximately 2% 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 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 that matches students with scholarships based on their skills, activities 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 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

Financial Literacy

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.