"That made privatization possible for us. That would never have happened" otherwise, Keler said.
To go private, the company faced two significant problems: where to get new money at competitive rates without its GSE status and how to pay off about $50 billion in debt it had issued. Under its new leaders, the company found it was still able to tap the credit markets for debt, and that it was able to securitize many of the loans it bought. "What we had to do was refinance the existing balance sheet and finance all the new business," Keler said.
_____Graphic_____
•
One-Stop Lending Shop SLM Corp., parent company of Sallie Mae, has branched out from its origins as a government-sponsored enterprise that bought and sold student loans. Now, Sallie Mae lends money directly to borrowers, collects bad debts and engages in a variety of related businesses.
|
| |
_____Special Report_____
•
Metro Business: Coverage of Washington area businesses and the local economy.
|
| |
|
The process went much faster than expected. Keler said that by early next year, the last $2 billion of GSE debt will be taken care of. Sallie Mae has grown in two ways since the proxy fight: expanding its private loan offerings and buying other companies in the student loan industry so it furnishes services and collects fees through the life of a loan.
Sallie Mae now gets about half its revenue from interest on guaranteed student loans, Keler said. The rest comes from fees -- some of which are related to guaranteed student loans -- and interest earnings on purely private loans.
The company now originates loans -- that is, makes them directly to students as well as buying them from other lenders. It holds some of those loans in portfolio and securitizes others; it "services" them, meaning it sends out coupons, collects payments and otherwise deals with borrowers in repayment; and it provides technical services for "guaranty agencies," the nonprofit intermediaries Congress set up to take on some of the default risk that would otherwise fall on the government.
Sallie Mae also has acquired several debt-collection agencies. And most recently, it added a company that buys defaulted debt and pursues the debtors, keeping whatever it recovers.
Private-brand loans to student and their families are growing because there are limits to how much can be borrowed under the federal program and that amount often does not cover the full cost of college.
Sallie Mae also uses technology to expand its reach, offering college financial-aid offices computer programs, Web sites and other tools to make it easier for them to award and manage student aid. It offers consulting services to colleges, advising them on how best to deploy financial aid and other resources to attract the most desirable students.
The company has also set up the charitable Sallie Mae Fund, which among other things has a program designed to encourage students in District public schools to attend college.
Sigh of Relief
Though Sallie Mae is nearly free of its formal ties to the government, its business still is based on a federal program and that means political issues in Washington.
