Lender Still Profits in Merger
Sallie Mae Still to Profit From Sell-Out
Angela Januzzi
August 6, 2007
Even though lending company Sallie Mae may be bought-out on August 15th by J.C. Flowers, Friedman Fleischer & Lowe, Bank of America and JPMorgan Chase, its directors will still receive $370million dollars in the sale.
In the midst of New York Attorney General Andrew Cuomo’s focus on student loan scandals between lenders and universities, critics are arguing the tremendous Sallie Mae profit represents the larger looming corruption of the student loan industry. The loan company is also facing criticism due to its previous government ties, though the company has been non-federally-sponsored for nearly a decade. Scrutinizers feel that the company's past identity as a government-sponsored loan program have some effect on the extravagant payoff now.
Tom Joyce, a spokesman for Sallie Mae, rebuttled, saying: “The company has diversified greatly away from being dependent on federal guaranteed student loans ... Since 1997, when this board really came into being, it has gone head to head with the major financial institutions in the United States and outperformed them. Should directors be compensated for that? They’re compensated with stock, and now they’re getting rewarded for that.”
If the buy-out occurs, however, because Sallie Mae will be included along with such giant financial institutions, the criticisms of lending companies' profits will no doubt continue in the wake of skyrocketing student debt.
Source: Lederman, Doug. "Salle Mae Directors to Profit Hansomely." www.insidehighed.com. Posted: August 6, 2007.