MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
ROBERT SIEGEL, host:
And I'm Robert Siegel. The nation's biggest student loan company is being sold. It's SLM Corporation, better known by the nickname Sallie Mae. Sallie Mae said today that it's being acquired by a group of private investors for about $25 billion. Sallie Mae is one of several student loan companies to become embroiled in the recent scandal involving improper payments to college financial aid officers. The deal is expected to face considerable scrutiny in Congress. We have two reports, the first from NPR's Jim Zarroli.
JIM ZARROLI: The buyers of the company include two private equity firms, J.C. Flowers and Friedman Fleischer and Lowe, which will control more than half the company. Bank of America and JP Morgan will also be among the investors.
The deal is taking place at a time when Sallie Mae's stock price has tumbled, but the buyers are offering what's considered a big premium for the shares. Christopher Wolf(ph) is managing director of Fitch Rating Service.
Mr. CHRISTOPHER WOLF (Fitch Rating Service): If you're the banks or if you're private equity, you probably see some opportunities in this in that the fundamentals of the business remain healthy, but they're not really being reflected in the company's stock valuations.
ZARROLI: Sallie Mae is a huge player in the student loan business. It originates nearly a third of the college loans issued in the country each year. In recent months, the student loan business has faced some serious challenges to its bottom line. There's been talk of changing the law to force lenders to shoulder more of the cost of loans and also of cutting federal money for student loans. Wolf says that isn't necessarily a bad thing for Sallie Mae because it's so big.
Mr. WOLF: It may play to the strengths of someone like a Sallie Mae because smaller competitors may not be able to stay in the business, yet the business still needs to get done. So it could actually help Sallie Mae in the long run, meaning they may have lower margins, but they'll make it up on volume, almost like a Wal-Mart does.
ZARROLI: But the company has other problems as well. There have been allegations that some student loan companies tried to improperly influence colleges and universities to refer students to them. New York Attorney General Andrew Cuomo said today that he's broadening his investigation into the activity.
Sallie Mae is one of several lenders implicated in the scandal. The company insists its done nothing wrong, but last week it agreed to pay $2 million and implement a code of conduct to govern its lending practices. Some critics in Congress say that allowing Sallie Mae to go private would make its activities less transparent. Company spokesman Tom Joyce says that's not true.
Mr. TOM JOYCE (Spokesman, Sallie Mae): We will continue to have oversight from the Department of Education. We will continue to be a highly regulated company. We will continue to abide by all state and federal laws. So the public can be assured, and Congress can be assured, that there will be ample disclosure about Sallie Mae going forward.
ZARROLI: Still, there are already rumblings about the deal announced today. California Congressman George Miller, who chairs the House Education and Labor Committee, said today he would scrutinize the deal carefully. Given Sallie Mae's checkered past, he said, Congress wants to be sure that the deal will be in the best interests of students and their families.
Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.
