Jun 18th, 2009 | NEW YORK -- The Department of Education says Sallie Mae and three other companies were chosen to service parts of its $550 billion in outstanding federal student loans and future loans owned by the government.
Reston, Va.-based Sallie Mae, officially called SLM Corp., is the country's biggest student lender.
The new contract announced Wednesday is for the servicing of federal student loans owned by the Department of Education and does not include loan origination. The five-year contract is expected to start in August, according to Sallie Mae. The government may renew it for one five-year term.
Investors have become concerned about Sallie Mae's liquidity and funding situation as its loan losses mounted and the Obama administration laid out in its fiscal 2010 budget plans to shift the way students get loans. Rather than subsidizing private lenders, the government would originate all college loans directly.
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