Sallie Mae Comes Under Pressure from Both Parties

Sallie Mae, the student loan agency that sounds like a buxom farm girl, might be in trouble.

After breathing a sigh of relief with the re-election of George Bush the Younger in 2004 (the share price shot up 10 percent), things aren’t looking as rosy for SLM Corp.  Most of their Republican allies in Congress are no more, and the Democrats are pushing legislation that could cut deep into SLM’s profits.

And then, of course, Bush himself hasn’t been the beau Sallie Mae thought he was.

In February, Bush proposed slashing federal subsidies by $12.4 billion while also scaling back government guarantees on student loans. This was after a House vote that cut loan subsidies by $7.9 billion.

Most everyone was caught, unawares.  “I have not talked to a single person who saw it coming. Not a single person,” John Dean, who lobbies on behalf of the Consumer Bankers Association, told <i>The Hill</i>.

While it’s doubtful the dramatic cuts besetting SLM will shut it out of the student loan game, these cuts could make lending difficult for smaller agencies.  And all will have to take tighter looks at schools with higher default rates.