Sallie Mae CEO Promises Bankers Vigorous Student Loan Competition

Sallie Mae chief Alfred L. Lord bluntly told bankers Tuesday to prepare for tough competition from the student loan concern.

"We are going to do more of what we can do well: originate student loans," Mr. Lord told a rapt audience of bankers at a conference sponsored by the Consumer Bankers Association.

"There are banks that are tough competitors in this business," Mr. Lord said, "and those that are just sort of there. Those who are just sort of there won't be in a few years."

The speech was Mr. Lord's first to commercial bank student lenders since Sallie Mae shareholders named him vice chairman and chief executive officer in August. Until now, bankers have originated student loans and sold them to Sallie Mae, which serviced them.

But this summer, shareholders endorsed Mr. Lord's plan to privatize the former government-sponsored enterprise. One of his selling points was moving the company into the origination business, creating a $43 billion- asset, national competitor for banks.

Though Sallie Mae will maintain partnerships with some banks, Mr. Lord said the company's relationships with schools, students, and shareholders are more important. Sallie Mae will begin lending directly to students next year, he said, but he did not specify when or in what volume.

"For those of you that are not our customers, we are going to turn up the heat ... we're going to be more aggressive," he said. "We intend to invest in this business, principally in the loan delivery area."

Mr. Lord challenged the more than 900 commercial banks and thrifts that participate in the government-guaranteed program to do the same.

"Nobody is putting any significant money into this business to improve delivery and technology," he said. "You've got to get your tails out from between your legs and stop apologizing for making a profit.

"I'm certainly not embarrassed to make a profit," he added.

While bankers have argued that Sallie Mae would be an unfair competitor in the student loan origination business, conference attendees Tuesday said they were resigned to the company's new direction.

In fact, several bankers praised Mr. Lord for pulling no punches and giving the industry sound advice.

"His remarks were right on the money," said Gary A. Sole, a vice president at National City Bank, Cleveland. "The most important thing our industry has to do is ... make it as easy as possible for students to get loans, and in order to do that, we have to improve our delivery systems."

"Al Lord told it the way he saw it, and I found it very candid and refreshing," said Kathy Cannon, vice president of Bank of America's National Student Loan Center in Brea, Calif.

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