SLM CorporationSLM

Morningstar Rating

Stock Research and Analysis

by Jim Sinegal

Sallie Mae's relationship with Uncle Sam has been both a blessing and a curse for the company. For many years, government guarantees allowed Sallie Mae to make nearly risk-free student loans and leverage them to the hilt, producing outsized returns Read more

Bulls Say

The market for student loans should grow as the number of students and the cost of higher education continue to rise.

Economies of scale as the nation's largest student lender produce a significant cost advantage over smaller peers.

Private student loans with much higher lending spreads are increasing as a percentage of Sallie Mae's assets.

The company's management and board of directors are open to a sale of the company at the right price.

Government actions temporarily relieved funding pressures on the company. Politicians will be reluctant to reduce the availability of student loans under any circumstances. Read more

Bears Say

Sallie Mae's main line of business, government-sponsored loans, will remain at the mercy of politicians.

Although Sallie Mae would benefit from greater access to deposit funding, few banks are currently in a position to purchase the company.

Private loans are made with no federal guarantee and virtually no collateral, though they are difficult to discharge even in bankruptcy.

Sallie Mae is making major changes to its business model, making it difficult to predict future profitability. Read more

Strategy

Sallie Mae's primary strategic objective is to reduce its dependence on government handouts. The company is making more private loans on which it can charge higher interest rates. It is also building Read more

Management

Sallie Mae's corporate governance record is mixed. We think the company deserves a B Stewardship Grade. We think current CEO Albert Lord clearly overplayed his hand in the buyout renegotiations with J.C. Flowers--a view we expressed at the time--leading Read more

Profile

Sallie Mae is the largest student lender in the country. It makes and holds student loans through the guaranteed Federal Family Education Loan Program as well as through Read more

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