Smart Borrower Blog

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.

2 Responses to “Sallie Mae In Financial Trouble”

  1. Crissy says:

    I am so happy that Salliemae is Finally in trouble. I graduated from college two years ago, and I have had nothing but problems with this company! They offer next to NO flexable repayment options when it comes to private student loans. They don’t take in consideration that their are very few jobs out there to pay them every month. Its about time that the public understands what is going on. I borrowed these private student loans at age 18, not understanding the conditions that I would be faced with upon graduation, nor could I predict that I would graduate in a recession. Additionally, this is NOT government control, this is protecting our tax dollars. This is protecting American families and upcoming college students. Why would anyone want to enter college right now knowing that they have to go into debt just to get a degree, with few job opportunities? The answer is not many! It’s statistically proven that enrollment rates are down across the country. College is expensive, not many have money these days to pay for it. Students need a student loan lender who is reliable and that isnt SallieMae!

  2. Marie says:

    Thank you so much for putting this comment here! I was doing research on this company and this confirms exactly the reason why I was hesitating with them. I can’t tell you how much money you just saved me.

Leave a Reply