Sallie Mae

History

The Student Loan Marketing Association was originally created in 1972 as a government-sponsored enterprise (GSE) and began privatizing its operations in 1997, a process it completed at the end of 2004 when Congress terminated its federal charter, ending its ties to the government. The company provides private education loans for students and their families. These loans are not made, insured, or guaranteed by any state or federal government.

In 1999, Sallie Mae acquired Nellie Mae Corporation for $320 million. Nellie Mae was originally established as the non-profit New England Education Loan Marketing Corporation in 1981 by the Massachusetts state government to serve as a secondary market buyer of federally-guaranteed student loans. Proceeds from Sallie Mae's purchase of Nellie Mae served to create an endowment for the Nellie Mae Education Foundation, which is no longer affiliated with Sallie Mae.

In 2005, Sallie Mae was among 53 entities that contributed the maximum of $250,000 to the second inauguration of President George W. Bush.

In August 2006, Sallie Mae acquired Upromise, a company that provides rebates to buyers of certain brands, which can be applied to college savings accounts. In May 2020, Upromise was acquired by loyalty marketing company Prodege.

On April 16, 2007, Sallie Mae announced that an investor group led by J.C. Flowers & Co. signed an agreement to purchase Sallie Mae for approximately $25 billion. Had the transaction been completed, J.C. Flowers, along with private-equity firm Friedman Fleischer & Lowe would have owned 50.2% of Sallie Mae, and Bank of America and JPMorgan Chase would each have owned 24.9%. Sallie Mae would have ceased to be a publicly traded company. The deal fell through in September 2007, with the buyers blaming adverse changes to the business's outlook as a result of the College Cost Reduction and Access Act of 2007 and the tightening of global credit markets following the 2007 subprime mortgage financial crisis. Sallie Mae subsequently began legal action, only to drop it in January 2008 upon completion of a $31 billion funding round, including funding from Bank of America.

In 2008, SLM was bailed out by the US government through a buy back of FFEL private loans.

On April 6, 2009, Sallie Mae announced that it would move 2,000 jobs back to the U.S. within the next 18 months as it shifts call center and other operations from overseas.

On March 31, 2010, Sallie Mae announced the impending layoff of 2,500 employees in response to the signing of new legislation calling for the federal government to lend directly to students, bypassing institutions like Sallie Mae.

Sallie Mae Bank

SLM Financial Corporation

Controversies

A 60 Minutes segment (originally aired May 7, 2006) examined Sallie Mae, including its business practices. Senator Elizabeth Warren, then a professor at Harvard Law School and sharp critic of what she characterizes as unfair lending practices, questioned Sallie Mae's dual role as lender and collector of student loans.

In February 2007, New York Attorney General Andrew Cuomo launched an investigation into alleged deceptive lending practices by student loan providers, including The College Board, EduCap, Nelnet, Citibank, and Sallie Mae. On April 11, 2007, Cuomo ended his investigation of Sallie Mae and announced that Sallie Mae had voluntarily agreed to change its lending standards to satisfy a new code of conduct for student loan practices established by Cuomo, and to donate $2 million (USD) to a fund devoted to educating college-bound students about their loan options.

On October 10, 2007, documents surfaced showing that Sallie Mae was attempting to use the Freedom of Information Act to force colleges to turn over students' personal information. The university involved, the State University of New York system, was expected to decline the request and be forced to defend its position in court.

In December 2007, a class action lawsuit was brought against Sallie Mae in a Connecticut federal court alleging that the company discriminated against African American and Hispanic private student loan applicants by charging them high interest rates and fees. The lawsuit also alleged that Sallie Mae failed to properly disclose private student loan terms to unsuspecting students. New York Attorney General Andrew Cuomo, raised similar concerns about possible student loan redlining in June 2007. The lawsuit was settled and dismissed in 2011. Under the terms of the settlement, Sallie Mae agreed to make a $500,000 donation to the United Negro College Fund and the attorneys for the plaintiffs received $1.8 million in attorneys' fees.

On January 31, 2008, SLM Corporation paid $35,000,000 to settle a lawsuit for failing to adequately reserve for losses in Sallie Mae's non-traditional portfolio.

A False Claims suit was filed against Sallie Mae by former U.S. Department of Education researcher, Dr. Oberg, in 2009. The suit alleges that Sallie Mae and other lenders deliberately overcharged the U.S. government. The findings by Oberg were labeled among higher education policy analysts as the 9.5 scandal.