- The Washington Times - Monday, April 29, 2002

USA Education Inc., the biggest buyer of U.S. government-guaranteed student loans, is benefiting from its smooth transition from a government-enterprise to a private company.
Shares of the Reston-based company, known widely as Sallie Mae, closed at $95.65 Friday on the New York Stock Exchange. That's about $13 higher than six months ago and near the stock's yearly high of $99.24 from late March.
"The stock has been phenomenal," says Matt Snowling, analyst with Friedman, Billings, Ramsey, who rates Sallie Mae a strong buy, as do most other analysts following the company.
Sallie Mae has made numerous acquisitions over the past several years, expanding into loan origination, consolidation and collection services, which can be done by one or numerous companies. Until recently Sallie Mae was primarily a wholesaler of student loans.
"But now they can generate profits from different parts of the loan cycle," Mr. Snowling says.
Until 1997 Sallie Mae was closely aligned with the government, created through an act of Congress in 1972. Then called SLM Holdings Corp., Sallie Mae's parent company changed its name to USA Education in 2000.
But on May 17 Sallie Mae is "going back to its roots," says company spokeswoman Martha Holler, changing its name back to SLM Corp.
The company reported first-quarter earnings a week ago, posting huge net income growth to $422.34 million ($2.63 per share) from $29.8 (16 cents) a year earlier. Net sales for the comparable quarters rose 49 percent to $553.2 million from $371.56 million.
"A lot of our success can be attributed to the success of our campus based sales model," Miss Holler says.
Sallie Mae grew its sales work force from about 20 people three years ago to more than 200 representatives now. These individuals call higher education schools throughout the county identifying their loan needs and delivering those products to them.
"What we've found is that the increase of folks in the sales force allows the company to call on more schools more frequently, and this service has given us the advantage on campus and has helped the company grow its loan origination and market share," Miss Holler said.
Analysts say now is the perfect time for Sallie Mae to aggressively seek larger market share, because the sour economy has sent more students to graduate school, which tends to require much larger loans than undergraduate schooling.
"There's a record number of kids going back to school and tuition prices are at double and triple the rate of inflation," Mr. Snowling says. "That's building a really strong loan demand."
One uncertainty around Sallie Mae is the upcoming congressional review of the loan limits next year. The caps have not been changed in a decade, while tuition prices have doubled, sometimes tripled. The student loan industry would benefit from a raise in the limit.
Gary Gordon, analyst with UBS Warburg, says chances are that Congress will "significantly raise" the limits, because students are having to take out higher interest rate loans to make up for the amounts that student loans don't cover past their limit.
The limit "is expected to go pretty high," Mr. Gordon says.

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