Sallie Mae (SLMA)
Also known as: student loan marketing association, slm corporation
Sallie Mae is the common name for SLM Corporation, originally chartered as the Student Loan Marketing Association, a government-sponsored enterprise created to support student lending. It is now a fully private company with no government backing.
Sallie Mae stands for the Student Loan Marketing Association (SLMA), created by Congress in 1972 as a government-sponsored enterprise (GSE). Its original mission was to keep money flowing to student borrowers: it bought federally guaranteed student loans from banks on the secondary market, giving lenders fresh cash to make new education loans.
Like other GSEs, Sallie Mae funded itself by issuing debt securities to investors. Because the issuer was a congressionally chartered enterprise, these securities carried an implicit — but never explicit — connection to the federal government, so they traded with slightly higher yields than Treasury securities of similar maturity.
Sallie Mae's status changed over time. Congress authorized its privatization in the 1990s, and the company completed the process in 2004, dissolving its federal charter. Today SLM Corporation is an ordinary publicly traded company that originates private student loans, and its obligations are backed only by the company itself — not by the U.S. government.
The Series 7 exam covers Sallie Mae within federal agency products. Know what the acronym stands for, that it was created to support the student loan market, and — the classic exam point — that it is a privatized former GSE, so its securities are not backed by the full faith and credit of the U.S. government.
Key takeaways
- Sallie Mae stands for the Student Loan Marketing Association, chartered in 1972 to support the student loan market.
- As a GSE, it purchased federally guaranteed student loans from lenders, freeing up capital for new education lending.
- Sallie Mae fully privatized in 2004; its securities are not backed by the U.S. government.
- The Series 7 exam tests Sallie Mae as a federal agency product and its non-guaranteed status.