What Is Sallie Mae?
Sallie Mae, formerly the Student Loan Marketing Association, is the country’s largest originator of private student loans as of 2019. While the lender was originally formed as a government-sponsored enterprise (GSE), it was completely privatized in 2004. Today, Sallie Mae is a publicly traded company, SLM Corporation, listed on the Nasdaq under the ticker symbol SLM.
History of Sallie Mae
The structure and operations of Sallie Mae have changed drastically since its founding.
Congress established the Student Loan Marketing Association—more commonly known as “Sallie Mae”—in 1972. As a GSE, it was given the ability to purchase federally guaranteed student loans from banks using Treasury funds, though it would eventually generate enough capital to do so on its own. By creating a secondary market for these obligations, the organization provided banks with a more reliable source of funding with which to make new loans.
- Once a government-sponsored enterprise, Sallie Mae is now a publicly traded company that's listed on the Nasdaq.
- The organization focuses on direct student loans, having spun off its loan-servicing business and debt-collection unit.
- Sallie Mae is the largest private education loan provider in the U.S., with $20.3 billion in outstanding student loans as of December 2018.
But by the early 1990s, lawmakers began to question the organization’s growing influence over the student loan market. Republican leaders, in particular, expressed wariness that the company’s implicit backing by the government gave it an undue advantage over competitors.
Meanwhile, the Clinton administration believed students could get lower interest rates if the government increased the number of loans it made directly to borrowers. The launch of the Department of Education's Direct Loan Program in 1993 marked a key turning point for the enterprise.
Sallie Mae Goes Private
Three years later, Congress gave Sallie Mae the authority to go fully private, a process that was completed in 2004. While losing its government backing, which had enabled it to borrow at below-market rates, the company managed to increase its influence in the student-lending market by acquiring competitors, expanding its portfolio of subprime loans, and growing its loan-servicing business.
By 2014, Sallie Mae faced mounting pressure over its loan-servicing practices, including a civil suit in which it was penalized $97 million for illegally charging military members high interest rates and fees. The organization decided to spin off its core loan-servicing business—as well as its debt-collection unit—into a separate business known as Navient Corporation. Meanwhile, SLM Corporation, which does business as “Sallie Mae,” focused on direct student lending.
In addition to providing student loans, Sallie Mae operates the Upromise program, which helps families save for college through cash back rewards and the use of a Upromise Mastercard.
Sallie Mae Today
Today’s Sallie Mae is by far the largest provider of private education loans in the United States, with $20.3 billion of these loans outstanding as of December 2018.
In addition to its role as a student-loan provider, the organization also operates the Upromise program, which helps families save for college by providing cash back rewards when they shop at select online retailers and restaurants or when they use the Upromise Mastercard. It also operates an online bank that offers depository accounts and provides personal loans.