Careers at Sallie Mae
Sallie Mae’s mission is to help American students and families make the dream of higher education a reality.
In 1965 the U.S. Congress created the Guaranteed Student Loan Program (GSLP) through the Higher Education Act. The GSLP enabled qualified students to borrow money at a special fixed interest rate each year they were in college. The program was established to supplement the government's grant and work-study programs, which helped students pay for higher education.
Under the GSLP, the government assumed risk for defaulted student loans, guaranteeing the loans directly. After a few years, it decided it needed to create a secondary market for the distribution of federally-insured, guaranteed student loans. So it established the Student Loan Marketing Association, nicknamed “Sallie Mae”, in 1972, which would provide more educational credit.
The new organization was designed to generate more funds for the GSLP by attracting greater lender participation. It aimed to do so by making student loans more liquid – specifically, allowing lenders to sell loans to Sallie Mae, without requiring them to use their earnings to make new student loans. This flexibility made lenders less anxious about tying up their funds in the program.
Beyond offering to purchase loans from lenders, Sallie Mae also offered warehousing advances (secured loans and lines of credit). Through this program it lent money to financial service providers to make new student loans by accepting existing loans or other government securities as collateral. This feature also served to make participation in the program more enticing.
Sallie Mae initially depended on financing from banks for its loans, and repaid them by selling federally-guaranteed securities in the same year. Afterwards, it obtained funds from the Federal Financing Bank, a branch of the Treasury Department, which offered attractive rates. The organization then began implementing a number of creative financing schemes.
By 1977, Sallie Mae was in a position to issue its first dividend. By 1980, it was able to offer $8 billion in new student loans. In 1981 it began raising the funds it needed on public capital markets, depending less on government. By 1982 its assets stood at $7.5 billion, up from $1.6 billion in 1979. In 1983 it made its first offering of preferred stock, and later common stock, becoming public.
In 1997 Sallie Mae began privatizing its operations. In 2004 Congress terminated its federal charter, cutting all remaining ties to the government. In 2014 it revealed that it would be separating into two publicly traded entities: Navient Corporation, an education loan management, servicing and asset recovery business; and SLM Corporation, a consumer banking business.
Business model of Sallie Mae
Sallie Mae has a mass market business model, with no significant differentiation between customer segments. The company targets its offerings at students and families seeking financial assistance.
Sallie Mae offers five primary value propositions: accessibility, convenience, cost reduction, pricing, and brand/status.
The company creates accessibility by providing a wide variety of options. It offers a broad range of loan options, including undergraduate student loans, graduate student loans, parent loans, career training student loans, medical residency student loans, and dental residency student loans.
The company offers convenience by making life simpler for customers. It provides access to an extensive, free online scholarship database, which features information about over five million scholarships with an aggregate value of more than $24 billion.
The company reduces costs through various options. Through its bank, it provides traditional savings products such as high-yield savings accounts, money market accounts, and certificates of deposit (CDs). Additionally, its Upromise by Sallie Mae save-for-college rewards program offers financial rewards on everyday purchases made at participating merchants.
The company offers a pricing value proposition. It provides competitively-priced Private Education Loan products to help customers bridge the gap between the cost of a college education and existing finances such as family resources, federal loans, grants, student aid, and scholarships.
The company has established a powerful brand due to its success. It bills itself as the leading financial services company specializing in education in the United States. It has helped over 34 million Americans pay for college.
Sallie Mae’s main channel is its website. The company promotes its offering through its social media pages, advertising, contests/sweepstakes, and participation in conferences.
Sallie Mae’s customer relationship is primarily of a self-service nature. Customers utilize its services while having limited interaction with employees. The company’s website provides useful resources such as tips from past customers, answers to frequently asked questions, and online planning and paying tools such as calculators.
That said, there is a personal assistance component in the form of phone and e-mail support.
Sallie Mae’s business model entails designing, developing, and delivering its financial products and services for its customers.
Sallie Mae maintains the Sallie Mae Partner Referral Program. Through the program, it works with other financial services providers to deliver its solutions to their customers and members. The partnerships serve to promote its brand and extend its reach. Benefits of the program include:
- The co-branded Smart Option Student Loan product, featuring competitive interest rates and flexible payment options
- Marketing tools and customer support, including web assets and social media posts, email campaigns, and printed materials
- Product training for partners‘ employees
Sallie Mae’s main resources are its human resources, who include the loan specialists that assist customers in obtaining services and the customer service employees that provide general support.
Sallie Mae has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is operating expenses. Other major drivers are in the areas of sales and marketing and administration, both fixed costs.
Sallie Mae has one revenue stream: revenues it generates from sales of private education loans to third parties.
info: He earned a Ph.D. in Economics at City University of New York and MBAs at Columbia University and New York University. He previously served as EVP of Banking at CIT Group and as Chairman and CEO of the Citicorp Retail Financial Services businesses.
info: He earned a Bachelor’s degree in Accounting at Louisiana State University and a law degree at Tulane University. He previously served as Chief Legal Officer and Corporate Secretary of BearingPoint, Inc.
info: He earned a B.A. degree in Economics at the Stony Brook University and an MBA in Finance at New York University. He previously served as Director, Investments at Sallie Mae and held treasury positions at Toronto Dominion Bank.
info: He earned a Bachelor’s degree in International Economics and Finance at Georgetown University. He previously held senior leadership roles at Bank of America, MBNA America, and NationsBank.
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