The Economics of Sallie Mae

Journal of Structured Finance, Forthcoming

Posted: 30 Jun 2012

See all articles by Tom Arnold

Tom Arnold

University of Richmond - E. Claiborne Robins School of Business

Bonnie Buchanan

Seattle University - Albers School of Business and Economics

Fiona Robertson

Seattle University - Albers School of Business and Economics

Date Written: June 1, 2012

Abstract

The Student Loan Marketing Association, “Sallie Mae,” was formed by the federal government in 1972 to facilitate a secondary market for student loans. Now an independent entity, SLM Corporation is the largest lender and servicer of student loans in the U.S. As Sallie Mae made the transition into being a dominant player in all facets of the student loan industry (including student loan asset-backed securities (SLABS), debt collection and guarantor servicing) two economic theories emerge. The “market for lemons” and “capture theory” theories serve as a useful illustration in understanding SLM’s evolution and future prospects.

Keywords: student loans, Sallie Mae, Asset backed securities, securitization, financial crisis

JEL Classification: G1, G2, G38, E40, L15

Suggested Citation

Arnold, Thomas M. and Buchanan, Bonnie and Robertson, Fiona, The Economics of Sallie Mae (June 1, 2012). Journal of Structured Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2072584

Thomas M. Arnold

University of Richmond - E. Claiborne Robins School of Business ( email )

1 Gateway Drive
Richmond, VA 23173
United States
804-287-6399 (Phone)
804-289-8878 (Fax)

Bonnie Buchanan (Contact Author)

Seattle University - Albers School of Business and Economics ( email )

900 Broadway
Seattle, WA 98122
United States
206 296-5977 (Phone)

Fiona Robertson

Seattle University - Albers School of Business and Economics ( email )

901 12th Avenue
Seattle, WA 98122
United States

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