The End of Sallie Mae?

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Sallie Mae, the publicly-traded corporation that makes money servicing more than $180 billion worth of student debt, is considering getting out of the whole education loan business altogether. According to an article by Mark DeCambre in the New York Post:

Sallie Mae… has tapped Goldman Sachs to help it consider a possible breakup of the company, The Post has learned. The Reston, Va.-based loan originator is working with Goldman to possibly sell or spin off its student-loan servicing business and do the same with its $145 billion government-subsidized loan portfolio. Sallie… also has considered converting part of its platform into a traditional deposit-taking bank, one source told The Post.

America’s largest student lender, Sallie Mae (its cute, little-old-lady name actually derives from the acronym of the name of the original corporation: Student Loan Marketing Association, or SLMA) received its charter from the federal government in 1972. Back then it was a government-backed entity designed to “help originate affordable student loans.” It later branched out to offer private loans. Sallie Mae became a private company in 2004.

Though not, it turns out, an entirely successful company. Despite receiving very generous government subsidies, according to the DeCambre article:

On July 21, the company, offically known as SLM Corp., reported its provision for private credit loan losses in the second quarter jumped 7.4 percent to $349 million and that its private credit charge-offs rose 18.3 percent to $336 million from its first-quarter numbers. Its loan originations fell 16 percent to $3.1 billion.

This briefly caused stock prices to fall. The company also fought with the Obama administration over direct lending.

Looks like maybe those student loans aren’t so lucrative anymore. [Image via]

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer