Sallie Mae Shows Learning is Lucrative for Lenders

NEW YORK (MainStreet)—When SLM Corp., the largest education financing entity in the country more commonly known as Sallie Mae, announced in January that profits for the fourth quarter of 2012 decreased to $343 million, from $506 million earned in the same quarter in 2011, it was a conspicuous reminder of how lucrative the student loan business is.

The company rebounded in the first quarter of 2013 with net income of $346 million, compared to $112 million for the same quarter of the previous year. Revenue for the first-quarter 2013 included a $55 million gain from the sale of the residual interest in a loan securitization trust of the now ended Federal Family Education Loan (FFEL).

According to a Sallie Mae press release, the first-quarter 2013 private education loan portfolio results vs. first-quarter 2012 included loan originations of $1.4 billion, up 22% from 2012.

The company still holds, as of March 31, 2013, $119 billion of FFELP loans compared with $136 billion at March 31, 2012, stated the communiqué. Indeed, during first-quarter 2013, the company issued $1.2 billion in FFELP asset-backed securities (ABS), $1.4 billion in private education loan ABS and $1.5 billion of unsecured bonds.

Sallie Mae said that it still continues to issue FFELP ABS primarily as a means to finance the redemption of FFELP loans financed in the U.S. Department of Education's conduit program. The company expects to redeem all of these loans prior to the conduit program's Jan. 19, 2014 maturity date.

Until 2004 Sallie Mae was a Government Sponsored Entity (GSE). It was the largest lender of government subsidized student loans. But Sallie Mae went private. It obviously still does well even though privatized and prohibited from making student loans since 2010.