Sallie Mae Moves Closer ToPrivatization
RESTON, Va. - (11/01/04) -- As part of its unprecedentedprivatization, Sallie Mae has wound down its government sponsoredenterprise charter and will no longer fund its operations throughthe GSE. The student loan giant, formally known as SLM Corp.,announced it plans to complete the privatization, which some see asa model for potential privatization of GSEs Fannie Mae and FreddieMac, as early as year-end, almost four years ahead of schedule. Aspart of the wind-down of the GSE charter, the company has beenbuying back its GSE debt, repurchasing $1.7 billion worth in atender offer ending Sept. 30, with plans for additional repurchasesover the coming months. The repurchase program has been costly,costing $103 million in losses the first offer, and projected tocost as much as $127 million in additional losses. Congresschartered Sallie Mae, originally the Student Loan MarketingAssociation, in 1972 to create a secondary market for guaranteedstudent loans. Legislation was passed in 1996 to privatize thecompany and wind down its GSE charter. Since then the company hasmorphed into the biggest originator of student loans in thecountry, in competition with credit unions and other traditionalcustomers, and has branched out into new areas, like investing inairplane leases and home mortgages.