Sallie Mae®, properly known as the SLM Corporation®, is a corporation concerned with the servicing of student loans. The largest provider of student loan services in the United States, Sallie Mae® claims to have lent money to over 31 million students since its inception in 1972. A controversial organization from the beginning, Sallie Mae® has faced frequent criticisms for its role as both a lender and a collector.
In 1972, the United States created Sallie Mae® as a government-sponsored enterprise. These business endeavors were meant to fuel credit and lending in targeted segments of the country; in this case, the targeted group was students. The Congressional charter for the organization was ended in 2004, making Sallie Mae® a wholly private enterprise. In 2010, following new student loan legislation that returned federal loan lending practices to the province of the federal government, the SLM Corporation® became a private lender.
Though still primarily concerned with college and graduate student loans, Sallie Mae® provides other loans that revolve around educational pursuits as well. Some of its loan programs include private school tuition loans for kindergarten through 12th grade students and families, medical, dental and health loans for students studying abroad, and post-graduate loans for law students studying for the bar exam. The company offers some savings account and education fund options, as well.
For most of its history, Sallie Mae® got its biggest business through providing and collecting federal student loans, such as PLUS loans and Stafford loans. Essentially serving as a middleman between the government and the borrowers, Sallie Mae® was the largest provider of government student loans. Perhaps not surprisingly, the company expended considerable efforts to prevent legislation from creating a federally based lending system that effectively eliminated the participation of Sallie Mae® in the lending and collection of new government loans.
Over the years, several controversies have surrounded the corporation, as well as the original laws set up to guide its practice. One major concern is a Congress-allowed program called school-as lender, which allows lenders to pay universities for handling some of the administration associated with student loans. While this may seem like a practical method of doling out responsibility, critics suggest that it encourages universities to steer students toward a particular lender in order to receive larger payments for serving as administrators.
Another major controversy arose as SLM Corporation® began to buy collection agencies during their tenancy as a government-sponsored enterprise. Collection groups are entitled to keep a percentage of money collected from defaulted borrowers, while lenders collect interest payments and origination fees on loans. This meant that the corporation could make an equal amount of money when a student paid on time, through interest, as well as when a student defaulted, through collection agencies.
Nevertheless, proponents praise the corporation for its efforts to create kickback and interest-reduction programs for some loan programs. It has also been recognized by industry leaders for having comprehensive material explaining lending structures. Though now a private lender, SLM Corporation® continues to be a major player in the business of student loans.