Tags: Sallie | Mae | loans | SLM

Sallie Mae Builds Niche in Private Student Loans

By    |   Friday, 30 Dec 2011 03:52 PM

SLM Corporation (SLM), often referred to as Sallie Mae, is a well-known source for college education loans. As the market has changed, Sallie Mae works to build a niche in the issue of private student loans.

Until July 1, 2010 private lenders were able to make federally guaranteed education loans under several government education funding programs. On that date the U.S. government took over 100 percent of the origination and issue of guaranteed student loans. In 2009 Sallie Mae had issued $22 billion worth of federal guaranteed loans, so the new rules forced the company to change its business model.

The SLM Corporation business is comprised of three main segments:
  • Consumer lending is the company's description for private student loans. These loans are made to students who need or want a different type of education loan than those offered by federal programs. The company originated $1 billion worth of loans in the 2011 third quarter, up 29 percent from a year earlier.
  • Business services is Sallie Mae's business segment, which generates fees from servicing a portfolio of student loans, including federally insured and issued loans. The segment also promotes and earns fees from college savings plans.
  • SLM still owns a portfolio of federally insured education loans issued from when private companies still originated federal student loans, referred to as FFELP loans. The portfolio still generates a significant level of revenue and operating profits.
The FFELP portfolio and business services businesses provide relatively steady revenue, but the growth potential lies in Sallie Mae's ability to increase the level of private education loan originations.

Recent results

For the first nine months of 2011, Sallie Mae reported operating earnings of $708 million, or $1.32 per share, up from $627 million and $1.27 per share in 2010. Reported GAAP earnings for the three quarters were $122 million. The lower GAAP amount was due to a continuing series of goodwill write-downs and derivative mark-to-market adjustments.

Full-year operating earnings are forecast to be $1.81 per share, compared to $1.88 in 2010. The 2012 consensus earnings estimate is $1.93.

The most recent analyst report on SLM was a reiteration of an equal weight rating by the Barclays Capital analysts. The analysts did raise their target price by $3 per share.

The company next reports on Jan. 18.

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SLM Corporation (SLM), often referred to as Sallie Mae, is a well-known source for college education loans. As the market has changed, Sallie Mae works to build a niche in the issue of private student loans. Until July 1, 2010 private lenders were able to make federally...
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2011-52-30
Friday, 30 Dec 2011 03:52 PM
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