We're a little confused on Sallie Mae's decision to continue marketing and funding FFELP products. It's a little unclear how they will make money at this.
We did point out yesterday that student loan monolines aren't really the sharpest tools in the shed when it comes to financial services. Has Sallie Mae stumbled on a marketing and processing epiphany that will allow them to drastically reduce costs in order to make a profit in this world of the DoE as investment banker? Is Sallie Mae merely playing lip service to appease the administration and congress while they lobby like starved wolved to get the Student Loan Sunshine Act repealed? Or, is this just a really bad business decision based on the promises the Department of Education has made? We just don't know.
What we do know is this: it is unprofitable to make FFELP loans. It not a function of "where's the money coming from?" Using a Wall Street investment bank, and certainly using the Department of Education as an investment bank, will NOT amend the lending landscape for FFELP loans. Structurally, the congress has torched the business model.
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