Sallie Mae worked closely last year with the government to ensure that students had access to federally backed loans without putting the burden on taxpayers, said Al Lord, SLM's chief executive. The company manages a $169-billion student loan portfolio and services more than 10 million borrowers.
"We are committed to delivering and servicing federal student loans, regardless of their funding sources," he said.
Student Loan Corp. argued against the Obama proposal, saying that "healthy competition leads to choice, innovation and high standards of service."
Nelnet contended that student loan programs should "maintain the benefits of choice and competition, and should not contribute significantly to the national debt."
Private companies lent $78 billion to students in the 2007-08 school year, said Mark Rodgers, a Citigroup spokesman.
Shares of several owners of private colleges also dropped Thursday, although experts said they were unsure whether Obama's proposal was to blame.
Corinthian Colleges Inc. in Santa Ana fell $1.35, or 6.7%, to $18.86. DeVry Inc., which runs DeVry University and DeVry Institute of Technology, was down $2.10, or 3.9%, to $51.30. ITT, which runs ITT Tech institutions around the country, dropped $6.60, or 5.6% to $110.69.
But the suggested shift away from government-backed private loans isn't a crippling move, said Lorena Valencia, who runs the financial aid program for ITT Tech in Torrance. Most of the students get loans from Sallie Mae or its competitors, she said, but the school also provides information on direct government loans.
"Since we present all the options to students and leave the choice to their discretion, there wouldn't be either a positive or negative impact on the school," Valencia said.
The timing is not good for some private lenders who have been hobbled by loan defaults after graduating students fail to find jobs in the worsening economy, said Emily Peters, a personal finance expert for consumer website Credit.com.
"Financing for student loans has fallen through the cracks in the last few months, with higher default rates and struggling companies," Peters said.
"This is definitely changing the landscape for a whole industry already in flux, though there's still a potentially strong market for private loans."
--
tiffany.hsu@latimes.com
