Sallie Mae In Financial Trouble
Jun 19th, 2009 @ 2:15 PM by Alden Smith
Sallie Mae, formerly known as SLM Corp., makes student loans. Recent news from Forbes indicates that the Obama administration unveiled on Thursday a new budget proposal that would make the government the sole provider of federally backed loans for students. This spells bad news for Sallie Mae, whose shares tanked on the news.
According to Forbes, the fiscal budget for 2010, which goes in place on October 1, should save the government more than $4 billion by slicing entitlements for companies like Sallie Mae. Beginning in 2010, new student loans would be originated through the direct student loan program.
If this budget proposal goes through, Sallie Mae would be adversely affected. The company has suffered financially because of the financial crisis we are seeing today. Sallie Mae lost 77.3% of its market value in the past year, and since July 2007, has seen its market value drop by 91.6%.
Matt Snowling, an analyst at Friedman, Billings, Ramsey, says that legislation would kill The Federal Family Education Loan Program. He feels that Sallie Mae will face many threats to its financial stability during the Obama administration. Even if this legislation does not pass Congress, its implications would still make things tough for Sallie Mae.
Reports from the Internet show that many people are fearful of too much government control in the industry, and feel that the government is stepping in to places it shouldn’t go. My thoughts are that if something isn’t done to stabilize and regulate financial institutions, then the economy will always be in jeopardy in one way or another. I am curious to see how this plays out.