Sallie Mae Raises $1.5 Billion for Private Loans
Reston-based Sallie Mae has secured $1.5 billion worth of financing from investment bank Goldman Sachs for a batch of private student loans, a sign that credit for the frozen student loan markets may be beginning to thaw.
The deal is the first transaction to provide funding for the private student loan market since September 2007, other than a relatively small securitization of $124 million, which was sold by the private lender MyRichUncle on July 10, 2008, according to Mark Kantrowitz, the publisher of FinAid.org.
"That's significant, as a first sign of a thawing of the capital markets," Kantrowitz said.
While Goldman will carry the loans on its books, Sallie will take on most of the risk. The student lender has agreed to pay Goldman a quarterly interest payment on the $1.5 billion for 12 1/2 years, according to a source familiar with the details who spoke on condition of anonymity because they have yet to be publicly disclosed. Goldman will turn over to Sallie all principal and interest payments from the loans. The deal is structured this way so that Goldman is assured of quarterly payments, whether the student loans are paid on time or not.
At the end of those 12 1/2 years, Sallie has agreed to either buy back the security backed by the loans, or if they are sold on the open market for less than $1.5 billion, pay Goldman the difference.
January 8, 2009; 5:17 PM ET
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