Sallie Mae Board Oks Privatization

The board of directors of Sallie Mae has approved a reorganization plan that will restructure the company as a fully private, state-chartered corporation, the company said Friday.

The reorganization plan will be submitted to Sallie Mae shareholders for their approval at a special meeting May 15 and is likely to be approved, the company said.

Upon shareholder approval, Sallie Mae will be reorganized as a private holding company, with the existing government-sponsored enterprise as a subsidiary.

Under the reorganization plan, the GSE subsidiary will hold all of Sallie Mae’s existing financial assets, but will gradually wind down its role in the business over time.

Sallie Mae, a government-sponsored, but privately owned, enterprise, provides a secondary market for educational loans and is the nation’s largest source of educational funding.

As a GSE, the company benefited from tax breaks and low-cost funding, but it is expected to benefit even more from the severing of its government links, as shown by the fact that the price of its shares soared last year after Congress approved legislation allowing full privatization.

Sallie Mae operates a regional loan servicing center in Spokane.