RESTON, Va. – Student loan giant Sallie Mae said yesterday it lost $216 million in the fourth quarter, to record a $213 million loss for the year.
Sallie Mae has been in and out of the red over the past few years as interest swings have buffeted its huge derivatives portfolio, which it uses to hedge its vast student loan portfolio.
The fourth quarter loss was caused by a $439 million unrealized loss on certain derivatives contracts, the company said. For the full year, Sallie Mae reported unrealized losses of $552 million on certain derivatives contracts.
The company has been on the wrong side of derivatives contract before, having lost almost $2 billion on a 2007 bet it would be able to complete the going-private sale of the company, which it was not able to complete.
The fourth quarter was marked by increased delinquencies in the company’s private loan portfolio, to 2.6%, from $2.3 for the previous quarter. For the quarter Sallie Mae set aside $384 million for managed private loan losses.
Separately, the Department of Education said it had initiated the first private student loan conduit through Bank of New York Mellon. The conduits will be securitized student loan packages that are guaranteed by the government. Sallie Mae said it plans to participate in the new program, which is aimed at propping up the student loan market, as well.
At the end of the year Sallie Mae had $180 billion in student loans under management.
