Publicly-held SLM Corp, which is the old Sallie Mae, is clearly a student education loan company, having $180 bil of Total Student Loans on its Balance Sheet at Dec 31, 2012.
Of these $180 bil of Student Loans, $37 bil of them are Private Education Loans. The weighted average effective interest rate on these $37 bil of Private Education Loans is a very hefty 6.58%. Further, the interest rates on many of these loans, about half of them, must be above 6.58%, and no doubt some of them have interest rates substantially higher than 6.58%. Further, the majority of these student private education loans are co-signed by parents and/or grandparents.
So clearly, SLM is charging steep interest rates to students on many of these Private Education Loans.
So, how can someone get a handle on how fair this is to students?
Well, just see how well SLM has done on the earnings front and also how well SLM's common stock has done.
Below here is Net Income from Continuing Operations attributable to SLM Corp for the most recent five years:
.....2008........$2 mil
.....2009....$544 mil
.....2010....$597 mil
.....2011....$600 mil
.....2012....$938 mil
Yeah, that's right, due mainly to wise actions by the Obama Administration and by the US Fed, SLM was effectively bailed out, with its earnings increasing from only $2 mil in 2008 to $938 mil in 2012. Its 2012 earnings of $938 mil was up a very robust 56% over 2011. And on an Earnings Per Share (EPS) basis, which drives common stock prices, this earnings growth in 2012 over 2011 advanced from up 56% to up 70%, due to SLM's huge common stock buybacks.
So, what about lately?
Well, in the first half of 2013, SLM's earnings were $889 mil, an off-the-charts increase of 121% over the $403 mil SLM earned in the first half of 2012. And its EPS increased by an even higher 146% in the first half of 2013.
OK, so what about SLM's common stock price?
SLM's common stock price hit a low of only $3.19 in early March 2009, shortly after the financial meltdown hit.
In comparison, SLM's common stock price closed at $24.49 today.
So, its common stock advanced an incredible 668% from early March 2009 to now.
When you put this altogether, SLM, its executives, and its common stockholders have made out like bandits, little from what they have done, but mostly thanks to the US Government bailing them out and continuing to prop them up.
And just who funded this massive accumulation of wealth by SLM executives and SLM common stockholders?
Well, you probably guessed it. It nearly all came from the massive interest SLM received from students.
And just what interest rates does SLM pay on its borrowings used to finance these student loans?
Well, it has $19.8 bil of short-term borrowings, which it pays a weighted average interest rate of only 1.25% on. And it has $152.4 bil of long-term borrowings, which it pays a weighted average interest rate of only 1.57% on.
This isn't right.....not even close to being right.
So why did it happen, and even continues to happen.
It's because the US Congress is controlled by the Big Financial Industry. And the US Congress, nearly all Republicans and also even some Democrats, just hopes that students with education loans and their co-signers don't figure it out.
If I either had or co-signed on a Private Education Loan held by SLM, or really held by any other Private Financial Institution, I would be hitting the Streets in protest at my Congressman's office. And I would be asking why he hasn't addressed this clear economic injustice to students who have private education loans.
