Sallie Mae Held Back By Interest-RateHedges

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RESTON, Va. - (07/22/05) -- Student loan giant Sallie Maereported net income of $297 million, or 66 cents a share, less thanhalf the $615 million for last year's second quarter, due to amajor shift in the value of its hedging portfolio. The companyreported a loss of $140.1 million on the value of its derivativesand hedges, compared to a gain of $269.4 million in the secondquarter last year. For the first six months of the year thecompany, formally known as SLM Corp., reported net income of $520million, down form $906 million for the first half last year.Sallie Mae, by far the largest provider of student loans, reporteda massive flurry of new consolidations in the quarter because ofthe July 1 rise in rates, resulting in an extension of the averagelife of its assets. For example, the average life of a newconsolidated loan is 12 years, compared to a 5.25-year average lifefor a new Stafford loan entering repayment. Third quarterconsolidations are also expected to reach record levels because ofthe number of loans processed, but not disbursed. At the end ofJune the company's loan portfolio grew to $116 billion, compared to$95 billion a year ago.

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