Sallie Mae To Be Sold To JP Morgan Chase, Bank of America

According to the New York Times, Sallie Mae, the largest lender of student loans in the US has been sold to JP Morgan Chase, Bank of America and two private equity firms for $25 billion. From the NYT:

Sallie Mae is both a lender and a debt collector, making profits on both sides of its loans. Last year, the company earned $1.2 billion and generated a lot of cash that makes it attractive to private equity buyers. Even so, some Wall Street analysts believe that it is a poor candidate to be saddled with debt because its business relies on razor-thin interest margins and the use of derivatives to manage its exposure to interest-rate swings.
… Currently, the company is carrying $142 billion in private and guaranteed loans on its books, about 27 percent of American student loans in the United States.

While 85 percent of its business is currently federally guaranteed, the company could also shift into the higher-interest and faster-growing market for private loans, which unlike guaranteed loans, is not subsidized by the government.

The student lending industry has been under quite a bit of scrutiny for lending practices that included incentives for colleges and universities to leave the US Government Direct Lending program, as well as offering monetary and gift incentives to officials in charge of making decisions about student lending.

Sallie Mae itself recently settled a case with the New York Attorney General and will pay $2 million into a fund to educate students and parents about the financial aid industry. —MEGHANN MARCO

Sallie Mae to Be Sold for $25 Billion
[NYT]

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  1. Avacasso says:

    Anybody have an idea how this might effect persons who currently owe sallie mae? or will it be business as usual, just a different corporate entity will be doing the deed?

  2. apeguero says:

    What you all should be asking yourselves is how will this affect the guaranteed student loan process. Sallie Mae was the biggest secondary market lender and as such made it easier for banks to lend money to students because they bought these loans from the banks that originated them. This is why they were originally created by the Federal Government. They also provided many services for these lenders thereby saving them lots of money in the process which could in turn be used to lend out to students. Too bad for them. Hopefully not too bad for us that need student loans. Answer to your question, you’ll get a payment book from JP Morgan or one of their cronies in due time.

  3. Trai_Dep says:

    Is Sallie Mae a quasi-public institution? If so then funded with public (i.e., our) dollars?

    If so then is this a situation where private entities are able to buy basically subsidized good and below market rates, suck all the value out of them, leaving the remains behind?

  4. tz says:

    Usurer friendly? The mideval world had the right attitude.

    As Shiva said, “I have become debt, destroyer of worlds”.