Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Sallie Mae (SLM)

What it is:

The Student Loan Marketing Association (SLM, or "Sallie Mae") is the largest originator, funder and servicer of student loans in the United States. It also provides counseling about student loans to students as well as their parents.

How it works (Example):

Congress created Sallie Mae in 1972. In 2004, Sallie Mae severed its ties to the federal government and became a private company.

Sallie Mae is a large organization with many subsidiaries. SLM Corporation is the formal name of the parent entity that oversees nearly all of Sallie Mae's divisions and functions. Sallie Mae, Inc. is a subsidiary entity that manages most of SLM's administrative functions, such as finance, marketing and legal responsibilities. It also services (that is, it manages the payment collection) of certain student loans. Here is a brief description of some of the Sallie Mae subsidiaries that provide education-related financial services:

  • Nellie Mae originates Federal Stafford loans, PLUS loans, consolidation loans, and private loans for students and parents.
  • Student Loan Funding (SLF) offers a wide range of student loans and provides technology services to schools and organizations offering student loans.
  • Academic Management Services (AMS) originates loans and runs a counseling service to help families budget for tuition.
  • Southwest Student Services Corporation funds, purchases and services student loans. It also offers financial aid counseling and loan consolidation.
  • Student Loan Finance Association offers financial aid counseling in Washington, Oregon, Idaho, Alaska, Montana, Utah and Northern California.
  • Sallie Mae Bank funds and originates Sallie Mae loans and is insured and regulated by the FDIC.
  • Sallie Mae Education Trust offers a variety of student loans as well as education and training to financial-aid professionals. It also provides information and services that educate borrowers about how to pay for college.

Why it Matters:

Sallie Mae enables millions of people to further their education goals each year. This in turn helps them earn more money, live better lives and bolster the economy on many levels.

Sallie Mae also provides important collection services to guarantors of student loans, thereby making the lending system less averse to students and their families. In addition, Sallie Mae's securitization of student loans brings more cash to lenders, which in turn have more cash to make more student loans.

Many investors and analysts consider debt in the form of student loans to be "good" debt. Although the amount of student loan debt accrued by college graduates has increased dramatically in recent years, this educational-related debt allows graduates to earn higher salaries as professionals.

Thanks to organizations such as Sallie Mae and its subsidiaries, more students are able to pursue higher education and finance their education in ways that are financially feasible.

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