Sallie Mae makes a surprising comeback [bloomberg businessweek, May 23, 2011]
The SLM Corporation is known informally as Sallie Mae. The financial institution is was until last year, the principal student loan institution in the United States for providing loans for tuition and expenses that enabled a high proportion of the college students in the United States to pursue a college degree. Sallie Mae guaranteed loans by private lenders to college students. In 2010, federal legislation was enacted by the Congress and signed by the President that put Sallie Mae out of the college student loan business with respect to the guarantee of such loans initiated by private lenders subsequent to 2010. Such loan guarantees accounted for 80% of the company's business. The company retains its portfolio of existing college student loans (Mulholland, 2011).
Sallie Mae was created as a quasi public sector entity in 1972. The company was fully privatized during the Bush Administration in 2004. Sallie Mae suffered revenue and profit losses since being fully privatized for two major reasons. First, a private equity made a failed hostile effort to acquire the company. Second, the economic and financial crisis (2008-2009) hit the company hard. The ban on private lender participation in student loans was expected to wreak further devastation on the company.
Instead of collapse, however, Sallie Mae has experienced growth in 2011.The company has its own cash cow in the existing base of student loans guaranteed prior to 2010. Sallie has developed new student loan programs that it initiates outside of the federal program. The company also strengthened its requirements for qualifications for the student loans that it now initiates as a private lender (Mulholland, 2011).
The opinion of this writer is that the government-guaranteed student loan program in the United States was a good
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