Student Loan Giant Sallie Mae On Firm Financial Footing

Student loan company Sallie Mae suffered a near fatal blow when the federal government passed a new loan that prevented it from issuing anymore federally backed loans. This means that the company would be forced to pay legal fees in the recovery of defaulted loan funds. In addition, millions of students will have the option of filing for bankruptcy to rid themselves of their student loans debts. Stock prices for Sallie Mae fell by over 95% and financial analysts began counting down the days until Sallie Mae filed for bankruptcy protection.

In the meantime, the student loan company had to act fast in order to protect its future. Student loans with variable interest rates were jacked up by 5 to 10 points nearly overnight. Sallie Mae was hit with more than five lawsuits – all of them initiated by either their investors or their customers. Sallie Mae then decided to part ways with all non-traditional colleges. The value of their portfolio dropped substantially, but they were able to secure more stable loans. Lending requirements were also tightened.

It took Sallie Mae over four years to recover, but now CEO Albert L. Lord believes that the future for this company is bright. Tuition rates have increased, which means that applicants are asking for more loan money. The number of late payments by borrowers has decreased and Sallie Mae stock prices have increased by over 200%. It will take a long time for the company to return to its former glory, but for now crisis has been averted.