The collapse of 2U and its subsidiary edX has put Sallie Mae (SLM) on the radar. Many of those elite brand certificate programs (under the name Harvard, MIT, Cal Berkeley) were propped up by Sallie Mae private student loans.
When the adult learners who took these certificate courses from edX did not get better jobs that they were promised, some ended up struggling to pay their loans. Some have defaulted on their loans. And a ripple occurs. As part of a larger edtech meltdown, and with IT jobs being lost each month, the situation promises to get worse.
As a hedge for SLM, most of these loans are processed into Student Loan Asset-Backed Securities (SLABS) and sold off as assets. Large investors, including pension programs are invested directly or indirectly in this mess.
Sallie Mae Boom and Bust
Sallie Mae (SLM) is a private lender that has had a number of problems. Despite being bailed out by the US government and spinning off part of itself, SLM has a poor credit rating that's bad and getting worse.
In 1972, the Nixon administration created the Student Loan Marketing Association, or “Sallie Mae” — a government-sponsored enterprise empowered by the government to use U.S. Treasury money to buy government-backed student loans from banks.
As a publicly traded corporation Sallie Mae has benefited from decades of close government connections.
SLM was very profitable (and very predatory to consumers) when there was little oversight, and the US economy was booming. But when the Great Recession hit in 2008, SLM had to be bailed out when the US government purchased billions of dollars in government-backed student loans. After that bailout, Sallie Mae returned to maximizing profitability. Over the last 5 years, SLM shares have gained 144 percent in value as student borrowers have suffered.
While the economy is doing well enough for the middle class, that could change for the worse, not just for consumers, but also Sallie Mae.
Recent Troubles, Troubles Ahead
In July 2024, Moody's changed its outlook on SLM's long-term from stable to negative,
The bond ratings were already less than stellar, a Ba1 for senior
unsecured notes. Ratings for some of its Student Loan Asset-Backed
Securities were downgraded in 2022.
Help for Student Debtors
For student loan debtors, we recommend joining the Debt Collective and contacting other advocates, including the Student Borrower Protection Center and the Project on Predatory Student Lending.
Related links:
2U Suspended from NASDAQ. Help for USC and UNC Student Loan Debtors.
2U-edX crash exposes the latest wave of edugrift (2023)
2U Virus Expands College Meltdown to Elite Universities (2019)
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