Student loan lender Sallie Mae said today it plans on making fewer loans in the future “in the wake of federal legislation last year to reduce subsidies for student lenders,” reports Reuters.
It said the College Cost Reduction and Access Act of 2007 “could possibly eliminate the profitability of new FFELP (Federal Family Education Loan Program) loan originations, while increasing our risk sharing from our FFELP loan portfolio.”
News Long Island writes that things aren’t looking good for the company in the coming months—although we’d wager the news is bad for students seeking financial aid, too.
The year 2008 looks much bleaker for Sallie May after its earnings forecast was lowered by more than 13 percent. That is a huge cut in earnings and the blame goes to a new law in effect which requires subsidies of the federal government to have more cash on hand to counterbalance defaulted loans.
Stock prices had already been falling since last July, so the cut in the forecasted earnings did nothing to help this student loan company. The falling prices initially began when a buyout of $25 million worth of stock fell through last July.