Sallie Mae May Lose 74% of Loan Business Under Obama Budget

[Joanne98]

Feb. 27 (Bloomberg) -- SLM Corp., the largest provider of U.S. student loans, may lose three-quarters of its origination business under President Barack Obama’s plan to end government subsidies for school lenders.

SLM, known as Sallie Mae, has increasingly relied on government subsidies as the worst financial crisis since the Great Depression limited its access to credit. Of the $24.2 billion in loans that Sallie Mae made last year, $6.3 billion, or 26 percent, weren’t federally guaranteed. In 2007, 31 percent of its loans were private.

Obama’s proposal to make the government the sole provider of federally backed college lending threatens to diminish Sallie Mae and leave it a servicer and debt collector, according to Portales Partners LLC. The shuttering of the asset-backed bond market curtailed the Reston, Virginia-based company’s ability to raise cash to fund loans. Sales of bonds backed by student debt fell about 50 percent to $31.1 billion in 2008, according to data compiled by Merrill Lynch & Co.

“They go from being an originator of loans to what could be just a servicer,” said William Ryan, an analyst at New York- based Portales, which rates the stock a “buy.” “The two parts of the business that effectively would remain would be servicer and the default management business. The final part of their business, private credit lending, is up in the air.”

Sallie Mae fell 54 cents, or 9 percent, to $5.26 as of 10:53 a.m. in New York Stock Exchange trading, after plummeting 30.9 percent yesterday. The stock has lost 91 percent of its value since reaching $58.12 on Jan. 13, 2006.

Notes Plummet

Sallie Mae’s $2.5 billion of 8.45 percent notes due in 2018 plummeted 16 cents to 67 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 15.2 percent, Trace data show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEheY06QYJiA&refer=home

[MichiganVote]

1. Another crooked arm of the government going down....way to go Obama.

[pansypoo53219]

2. sweet

how long has he been the decider?

[eridani]

3. Love it!

http://www.truthout.org/022709EDA

"Right now, the subsidies in the government-guaranteed student loan program are set by the Congress through the political process. That program has not only needlessly cost taxpayers billions of dollars, but has also subjected students to uncertainty because of turmoil in the financial markets," the budget document said.

The change, subject to review by Congress, could spell the end of the Federal Family Education Loan Program, a source of revenues for years for many student loan groups.

"President Obama proposes that, beginning in 2010-2011, all new student loans would be originated through the direct student loan program," said California Democratic Rep. George Miller, chairman of the House education committee, in a statement praising the president's proposal

[Hello_Kitty]

4. Good!

And now let's stop with this student loan nonsense entirely and have free, or nearly free, public college education like every other country with lick of common sense has.

[truebrit71]

6. Amen to that...or...have the college grads do two years of public service to pay off the loan...

...

[JohnWxy]

5. REpublicans were paid to insert middle-men where they were not needed - just so someone could profit

from a worthy public policy. Cut out the F------ middlemen - they don't contribute any value to the equation.

Obama ROCKS!