A group of investors will purchase Reston-based student loan giant SLM Corp., or Sallie Mae, for $25 billion.
Sallie Mae’s management team will continue to lead the company, and its headquarters will remain in Reston. New York-based J.C. Flowers & Co. will invest $4.4 billion and own the majority of Sallie Mae; Bank of America and JPMorgan Chase each will invest $2.2 billion.
News of the deal comes at a time when Sallie Mae is facing scrutiny from federal regulators. Both Congress and President Bush have expressed a desire to eliminate the federal subsidies the loan firm receives. Sen. Edward Kennedy, D-Mass., introduced legislation that would reward colleges for convincing students to deal with the federal government directly for loans.
Rep. George Miller, D-Calif., chairman of the House’s Education and Labor Committee, expressed wariness over the pending deal in a statement.
“The possibility of Sallie Mae … becoming a private company raises significant concerns that even less information will be disclosed to the public,” Miller said.
Sallie Mae said in a statement Monday that its new owners are committed to maintaining transparency and the firm still will be subject to oversight by the government. Sallie Mae last week settled with New York Attorney General Andrew Cuomo for $2 million, after an investigation into its lending practices. The firm was accused of providing kickbacks to schools that urged students to use the company’s loans.
“It’s surprising to me that a consortium of banks would do this now, as the outlook for Sallie Mae is clouded pretty significantly,” said Keith Davis, a research analyst with the Washington-based investment firm Farr Miller & Washington LLC.
The company still will benefit from its private lending ventures, however, even if the government takes control of federally guaranteed loans, Davis said.
Moody’s Investors Service said Monday it may downgrade Sallie Mae’s rating if the purchase is finalized. The transaction requires regulatory approvals and is expected to close late this year.
