Monday, April 16, 2007

Sallie Mae to be Sold for 25 Billion

Just yesterday I wrote a post about how student loans were big business. Today it is reported that Sallie Mae, the nations largest lender to college students has been sold for 25 billion to a group that includes JPMorgan Chase and Bank of America.
For Sallie Mae, which originates nearly 23 percent of student loans, this deal may be a salvation at a time when its business model has been under attack from several directions. All the uncertainty has caused Sallie Mae’s stock to plunge more than 20 percent over the last year, making it a takeover target.
My post yesterday talked about how it is actually more costly to the government to guarantee loans outside the direct loan program. Why would JPMorgan Chase and Bank of America pay such a huge sum of money if it would not translate into profit for them? The loser in this deal will be the college students of America who will undoubtedly pay higher costs for student loans and the American taxpayer who will once again subsidize big business.

Read this article here.

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