Washington — After a difficult year, the nation’s largest student-loan company feels it needs to work even harder at withholding its services from certain students.
Albert L. Lord, the chief executive of Sallie Mae, said in an interview with The Wall Street Journal that his company’s future success depended on showing greater selectivity in issuing loans.
“I guess with 35 years of experience of saying ‘yes,’ we were just not very good at saying ‘no,’” Mr. Lord said in explaining the recent decline in Sallie Mae’s stock price.
Sallie Mae was created by the federal government in 1972 as an agency charged with ensuring that college students would have access to a steady flow of money to finance their educations. Mr. Lord led the effort to convert Sallie Mae into a private corporation in 2004. After delivering to Mr. Lord and his fellow executives hundreds of millions of dollars in salary and stock benefits, Sallie Mae has seen its share value drop by more than 60 percent over the past year.
Sallie Mae helped persuade Congress and the Bush administration last month to grant lenders new financial benefits for participating in the federally subsidized student-loan program. Yet Mr. Lord told the Journal that the federal program had not produced any profit growth for Sallie Mae for the past five years, and said it “is not our principal business anymore.”
Mr. Lord, in a May 21 conference call with college officials after the federal rescue plan was announced, said the terms were “barely” enough to keep Sallie Mae lending to “virtually” all students in the federal system, at least for one more year. He told the Journal in the interview published today that the fate of Sallie Mae’s investors “really is in the hands of our other products, principally private-student loans.”
Sallie Mae will keep writing loans outside of the government system, but will stop offering such private loans at colleges that tend to serve lower-performing students. “It was obviously a mistake” to have offered loans at such institutions, Mr. Lord told the Journal. —Paul Basken
