Student lender stocks fall on budget request

Shares of student loan providers fell Monday after President Bush’s budget request included a proposal to cut lender subsidies by 0.5 percentage points — an amount one company said would increase the burden on taxpayers.

SLM Corp., also known as Sallie Mae, called the proposal “harmful” and said it would lead to reduced competition because private-sector lenders serve about 80 percent of all student borrowers.

“Students and families will have less choice and more expensive loans, and taxpayers will carry the burden and cost of higher student loan defaults,” according to a statement from Reston, Va.-based SLM.

Shares of SLM fell $4.09, or 8.8 percent, to end at $42.37 on the New York Stock Exchange, where they earlier reached a 52-week low of $41.57.

Stamford, Conn.-based Student Loan Corp., which partners with majority owner Citigroup Inc. on loans, and Lincoln, Neb.-based Nelnet Inc. also saw their stock prices drop.

“Over the last decade, the (Federal Family Education Loan) program has proven itself in the marketplace,” Nelnet spokesman Eric Solomon wrote in an e-mail.

“We need to make sure that the proposed budget cuts do not hinder the competition that adds real value to students and schools.”

Mike Reardon, chairman and chief executive of Student Loan Corp., said the proposal could adversely affect millions of students and many colleges and universities. “These proposals should be seriously reconsidered in terms of their practical impact and unintended consequences,” he said.