Shares of student loan companies dive on Obama plan
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Stocks of private companies in the student loan business have crumbled today after President Obama proposed a halt to federal guarantees on their loans. Instead, he wants to make that lending business solely a government function.
Student lender SLM Corp., known as Sallie Mae, was down $3.08, or 37%, to $5.31 about 12:15 p.m. PST.
Student Loan Corp., which is 80% owned by Citigroup, was off $12.07, or 23%, to $41.07; Nelnet Inc. was down $5.40, or 50%, to $5.34.
From Bloomberg News:
Obama said shifting to direct student loans would save more than $4 billion a year, which would be used for more student aid. About 64% of federal student loans are made by private lenders, are subsidized and are guaranteed by the government, according to the House Education and Labor Committee. The remaining 36% are loans directly from the government to students, the method by which future loans would be made under Obama’s proposal. Colleges and universities now decide which programs they want to participate in. Obama ‘has put forth a solid plan to make federal student loans more reliable, while saving taxpayers billions of dollars,’ said Education Committee Chairman George Miller, a California Democrat.
From the Associated Press:
Even if Obama’s proposal doesn’t become law, it suggests Sallie Mae and other student lenders will face continuous threats under the administration, FBR Capital Market analyst Matt Snowling wrote in a note to clients. Snowling lowered his price target on SLM shares to $13, down from $20, to reflect the possibility that Sallie Mae could turn into a servicer and debt collector for the government.
Sallie Mae tried to put the best face on things, saying in a statement, ‘As more details emerge in the weeks and months ahead, we will continue to work with the administration and Congress to implement the best solution for students, schools and taxpayers.’
-- Tom Petruno