After Navient spinoff, fiscally fit Sallie Mae moves ahead
Top student loan provider looks to new products and strategic growth
By Michael Bradley
Special to Delaware Business Times
Since nearly 100 percent of all students at Delaware State University are receiving some form of financial aid, whether federal loan, grant, work-study money or private financing, Stephen Ampersand is a pretty busy man.
The university’s assistant vice president for financial aid has been with the school for two years – after a stint at Cecil Community College in Maryland – and is quite experienced in helping students find ways to make their college dreams realities.
“The biggest challenge we have is the dichotomy,” Ampersand says. “We want people to focus on studying and getting their credentials, because it’s a gateway to the middle class. At the same time, we don’t want them to have a mountain of debt that nullifies that credential.”
Ampersand and his staff work to help students utilize creative ways to fund their college dreams. One such option is a private loan, from companies like Sallie Mae. That option differs from federal programs in that students pay interest while they are in school, rather than having no obligation until they graduate, but the increased product line and the absence of initiation fees make Sallie Mae a solid option.
“[Sallie Mae] is on our list of preferred lenders,” Ampersand says. “They have done a really nice job making the product available to students and have been timely in getting us the money from the loans once they have been approved for the students.”
Created in 1972, Newark-based Sallie Mae is the top provider of private student loans, and business is good. Its portfolio sits at $12.4 million, a 24 percent increase over its holdings a year ago. Its overall first quarter profits for 2016 were even more robust, thanks to a net income of $65.9 million, a 37.5 percent growth from 2015. That backed up a fine fourth quarter finish to 2015, which also defied experts’ predictions.
It would appear as if the growth is poised to continue, thanks to the company’s aggressive pursuit of clients and the April 26 introduction of a new product, the Sallie Mae Parent Loan, which will allow parents and others who want to assist students with their college payments borrow money.
“We’re in full-on growth mode at Sallie Mae,” says Martha Holler, senior vice president of corporate marketing and communications.
A big reason for that push forward is the completion of the separation begun in 2014, in which Sallie Mae spun off its loan servicing and management and asset recovery functions into a new company, Navient, which is based in Wilmington. Thanks to the completion of the split, Sallie Mae has been able to become more aggressive in its push for loan business, diversify its savings component and offer new products.
“[The spinoff] was highly complex,” Holler says. “We had to do a full assessment, and in many areas, we had to create two departments. We have two human resources departments, two compliance departments. Now, we’re fully independent, and we’re looking forward, as you saw from our earnings growth.”
The Parent Loan is part of the strategy for future growth and a maintaining of the robust profits. Although Holler reports that nine of 10 loans Sallie Mae provides are co-signed, often by a parent, the institution of a product that removes the student from the repayment process is more convenient for others who want to help out and also beneficial to the company, since established individuals are less likely to have trouble making payments than are fledgling college graduates.
“What we see time and time again are two things,” Holler says. “First, there is no single way to make the investment in college. The other thing that comes out, loud and clear, is that families tap a variety of sources to pay for college.
“Many parents intend to cover part of the expense, and they would like to have other options.”
Holler reports that there are other programs being prepared for rollout, and although she cannot divulge any details yet, she promises there is “more to come.” One area in which Sallie Mae has already introduced new initiatives is in the awarding of grants to needy students who want to gain college educations. On April 12, the company awarded four $25,000 scholarships in a ceremony, with half the money raised by a panoply of programs – small and large – involving Sallie Mae employees throughout the country. Another scholarship fund, the Make College Happen Challenge, asked high school students to devise creative ways about how they would pay for college and awarded grants to 10 winners.
The largest percentage of Sallie Mae staffers is found in Newark, where 746 of the company’s 1,183 full-time employees work. (There are other offices in Newton, Mass., Salt Lake City, Indianapolis and Reston, Va.) Sallie Mae moved from Reston to Delaware in 2008, and it has been extremely happy with its decision.
“This is home,” Holler says. “There is tremendous talent in this area. I was part of the company when we were in Virginia and moved to Delaware. It has been great to watch it grow.”
As Sallie Mae’s bottom line swells, and it moves forward aggressively, it is trying to work with its customers to make sure they are able to meet their commitments and avoid some of the horror stories that characterize the student loan climate. Two years ago, U.S. Sen. Elizabeth Warren called on Sallie Mae to disclose how it plans to help struggling borrowers. Holler explained that the co-signing process has helped in that regard, and the company provides pre-loan education for students about how they should be preparing to make payments in advance of their first deadline. Salle Mae also works to ensure that students don’t borrow more than the cost of attendance. Holler said that “98 percent of customers are effectively managing their loans,” leaving a small default figure. That’s good news for the company, which hopes to continue its growth in the future.
“Things look good,” Holler says. “It’s great to be focused on what we want to do next. There are a lot of conversations going on within our walls.”