The chief executive of Sallie Mae warned of a “train wreck” in the student loan market today. The headline evokes fears that yet another shoe is about to drop in the national credit crisis. However, Chief Executive Al Lord was in Washington seeking taxpayer subsidies of his business. Sallie Mae has two problems. The company’s costs to borrow money to make loans has risen and the availability of these funds have diminished. Therefore it wants the government to step in and provide funds. Sallie Mae also cannot sell loans on the secondary market as profitably as it once could. So Sallie Mae wants the government to buy debts that it can’t sell elsewhere.
It makes sense that the company would want to use attention-grabbing terms when in Washington seeking subsidies. If Sallie Mae gets what it wants, student loans may be easier to get for borrower (this is what the company contends). Current student loan debtors will not be affected by the legislation pending in Congress to address Sallie Mae’s concerns.
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