Sallie Mae Slips on Budget Plans

Educational lender SLM Corp., known as Sallie Mae, could face a short-term squeeze on its margins under student-loan changes proposed by President Bush in his 2006 budget, brokerage Friedman Billings Ramsey told clients Tuesday.

But in the longer term, plans to for higher loan limits, longer repayment terms and variable-rate consolidation loans should benefit Sallie Mae.

SLM shares were down 6.7 percent, or $3.37, at $47.30.

Analyst Matt Snowling downgraded the company to “market perform” from “outperform,” saying long-term investors should hold off until it becomes clearer which budgetary changes receive congressional approval.

Congress created Sallie Mae in 1972 as a government-chartered enterprise to help students get access to loans. Late last year, however, the company severed its ties with the federal government.

Of particular concern to Snowling is a proposal to allow borrowers to consolidate their loans more than once, subject to a 1 percent fee for processing the application, known as an origination fee.

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