Sallie Mae, America’s largest student lender, has tapped Goldman Sachs to help it consider a possible breakup of the company, The Post has learned.
The Reston, Va.-based loan originator is working with Goldman to possibly sell or spin off its student-loan servicing business and do the same with its $145 billion government-subsidized loan portfolio.
As a part of its strategic thinking, Sallie, run by CEO Albert Lord, also has considered converting part of its platform into a traditional deposit-taking bank, one source told The Post.
A Sallie representative was not available to comment and a Goldman spokesman declined to comment.
The move comes as the student lender faces stiff economic headwinds amid a swiftly changing regulatory and political landscape that has proved challenging for the corporation.
Founded in 1972 as a government-backed entity to help originate affordable student loans, Sallie has had an increasingly tough run as a private business since severing ties with Uncle Sam in 2004 and seeing government loan subsidies whittled away.
The end of such subsidies has badly damaged key revenue drivers. Its latest blow: the Federal Family Education Loan Program, a US Department of Education initiative that offered subsidies to private lenders ended this month, forcing Sallie to rely more on its private-lending platform.
Its private-loan business, known as Sallie Mae Bank, hasn’t been faring well either, given the faltering economy.
On July 21, the company, offically known as SLM Corp., reported its provision for private credit loan losses in the second quarter jumped 7.4 percent to $349 million and that its private credit charge-offs rose 18.3 percent to $336 million from its first-quarter numbers. Its loan originations fell 16 percent to $3.1 billion.
That news spooked investors and sent shares tumbling 11 percent, or $1.32, to $10.34 — the stock’s largest one-day decline in six months. Since then, it has nearly recouped those losses; it closed yesterday at $11.22, up 14 cents.
Of late, Sallie Mae has locked horns with the Obama administration, blaming plans to lay off 2,500 staffers and move its headquarters from Reston to Delaware on provisions in the new healthcare reform package that offer government loans to students directly — eliminating middlemen like Sallie.
Sallie would be in private hands if not for a collapsed leveraged buyout of the firm three years ago that resulted in a nasty legal suit with a private equity group led by J.C. Flowers & Co.
Currently, Sallie has about $27 billion in unsecured debt. Most analysts believe it can generate enough cash through its current operations to pay interest on its debt.