- The Washington Times - Tuesday, October 22, 2002

Stock prices for SLM Corp., the Reston parent company of Sallie Mae, dipped yesterday after achieving a record high last week.
The nation's largest student-loan provider's stock closed at $104.50, 50 cents less than the six-month high of $105 the company saw after the releasing lower losses for the third quarter ended Sept. 30.
"Third quarter is back-to-school time for millions of college students, and an ever-growing number of those students are paying for their education with a loan provided by Sallie Mae or one of our affiliated brands," said Albert L. Lord, Sallie Mae's vice chairman and chief executive officer.
Sallie Mae executives did not return repeated calls for comment.
Mr. Lord said growth in loan originations and the larger spread in student loans helped the company capitalize on low interest rates.
Mark Alpert, analyst with Deutsche Bank, said the company's recent cuts in operating expenses and an increase in public university tuition spurred the dramatic drop in losses for the third quarter to $62.4 million (42 cents per share) from losses of $194 million ($1.21) a year earlier.
"The stock has had a pretty smooth year and we expect it to get stronger as the company absorbs some of the deficits it has incurred," Mr. Alpert said, rating the company a strong buy.
"Even though the company reported losses, [it] still had enough strong earnings in the core cash section to see them through and cover other dividend costs."
The core-cash-accounting practice, which excludes charges from write-downs on interest rate hedge contracts, has increased investor confidence in Sallie Mae stock, said Joel Gomberg, analyst with William Blair & Co.
"Investors tend to look more at the core cash part of earnings than the plain numbers because it shows the real net worth of the company," said Mr. Gomberg, who also advised Sallie Mae investors to buy.
Without the charges, the company said earnings would have increased 19 percent to $191 million ($1.21) from $160 million (99 cents) for the previous year.
Mr. Gomberg said high enrollment rates at public universities and increasing tuition costs were positive signs for the student-loan industry.
"It's a nice trend that Sallie Mae and other loan companies are really taking advantage of in this weak economy," Mr. Gomberg said.
The College Board reported this week that tuition and fees at U.S. public universities rose 9.6 percent this year to an average of $356 more for regular tuition.
"Most people are going to take out student loans than go through the government because the interest rates are low and they can get a 98 percent government guarantee for each loan, making it appealing for its low credit risk," Mr. Gomberg said.
Loan originations totaled a best-ever $3.9 billion in the quarter, up 19 percent from $3.3 billion a year ago, the company said.
While the company reported high back-to-school activity for the quarter, including the acquisition of two collection companies, operating expenses were lower than last year, Mr. Alpert said.
"The company has been very good about being more efficient and scaling back some of their operations to reduce expenditures," he said.
"It gives investors reassurance that the company is moving forward to reduce deficits."

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