The Student Loan Marketing Association (SLMA), better known as Sallie Mae, was established in 1972 as a federally chartered, stockholder-owned CORPORATION providing funding for education. Because most beginning college students have little INCOME or credit history, it is difficult for them to borrow for their education. Sallie Mae’s primary activity is funding educational LOANS through loan guarantees. Sallie Mae guarantees loans made under the Federal Family Education Loan Program (FFELP). Federal student-loan programs include Stafford loans, Perkins loans, and Parent Loan for Undergraduate Students. Through a variety of subsidiaries, Sallie Mae is the leading student lending, servicing, and loanguaranteeing organization in the country. As of 2002, Sallie Mae owned or managed over 5 million loans. As a government-sponsored enterprise (GSE), Sallie Mae created a secondary market for student loans. GSEs have implied federal-government guarantees, reducing the risk associated with borrowing, which reduces the cost of funds to the lender. Like other GSEs, Sallie Mae packages and services government-guaranteed loans, selling these loans to investors. This releases funds back into the lending market for additional student loans. During the 1980s and 1990s, Sallie Mae was criticized for poor management and high rates of DEFAULT on government- sponsored loan programs. Reforms in the 1990s, particularly termination of loan programs at institutions with significant default rates, have decreased the problem of non-payback of loans. The GSE part of Sallie Mae must be dissolved by 2008. In 1997 Sallie Mae was reorganized with SLM Holding Company, and in 2000 it was renamed USA Education, Inc. In addition to the SLMA, Sallie Mae controls SLM Financing Corporation and Sallie Mae Solutions. Through these subsidiaries, Sallie Mae offers consumer-credit loans, including continuing education, K–12 loans for parents whose children attend private school, and business and technical OUTSOURCING services for colleges throughout the United States.
See also GOVERNMENT-SPONSORED ENTERPRISES.