Sallie Mae will Continue Student Loans

Prospective college students received their first good financial news in months when SLM Corp., more commonly known as Sallie Mae, said that it would continue to make federally guaranteed student loans rather than following the stream of lenders who have exited or sharply reduced their commitments (“Student Loans Drying Up, Dodd Warns,” April 17), (“ED Prepared to Become Student Lender of Last Resort,” May 5).

The Wall Street Journal reported this week that the Bush Administration’s plan to use U.S. Treasury funds to help support student lending will enable Sallie Mae to continue in the federally guaranteed program through the upcoming school year.

Sallie Mae owns or manages student loans for nearly 10 million customers, administers more than $18 billion in college savings accounts for 1 million customers through its Upromise subsidiary and employs approximately 12,000 individuals at offices nationwide.

According to the Journal, 89 lenders have reduced or ended their participation in the FFEL program, citing cuts in federal subsidies and difficulties in raising capital, partly due to the enactment of is last year’s College Cost Reduction Act cut subsidies to student lenders.

Meanwhile, state loan guaranty agencies in Pennsylvania, Michigan, Montana and Texas have also effectively posted their own “closed for business” signs and indicated that they too plan to exit the student loan making business.