Sallie Mae (SLM) is seeking to separate its education loan management and consumer banking businesses into two publicly traded entities.
The company's board of directors appointed Jack Remondi chief executive officer to replace Albert Lord, who will retire from the board and executive management, Newark, Delaware-based Sallie Mae said Wednesday in a regulatory filing. The lender announced Lord's departure in November.
Legislation passed in 2010 cut companies out of the government-guaranteed student loan market, forcing the lender to remake its business to focus on private debt. Sallie Mae made $1.4 billion in education loans in the first quarter, a 22% increase from the year-ago period, the company said in an April 17 statement.
"The strategic separation represents a natural business evolution since FFELP originations ended in 2010," Remondi said in the filing, referring to the Federal Family Education Loan Program. "Sallie Mae has successfully adapted its businesses."
Both companies will initially be owned by existing shareholders, according to the filing. Assets under the education loan management business will consist of about $118.1 billion in debt under the government's FFELP program, $31.6 billion in private education loans and $7.9 billion of other assets.
The consumer banking business is projected to have about $9.9 billion of total assets, including private education loans and related origination and servicing platforms, according to the filing.
Soaring student-loan delinquency rates in 2012 were highest among borrowers under the age of 30 who are repaying their debt, according to the Federal Reserve Bank of New York. Thirty-five percent were 90 or more days behind, compared with 21% in 2004.
Delinquencies in Sallie Mae's portfolio are "starting to feel a lot better," since the lender stopped making loans for non-traditional schools such as for-profit institutions, Lord said in an April 18 conference call with investors.
