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While Sallie Mae has grown to be the predominant secondary market for student loans many higher education sources say the company has become preoccupied with turning profits. David Longenecher of the Minnesota Higher Education Coordinating Board a $100 million "last resort lender" to students who can't get loans anywhere else says. "We're kind of critical of the way in which (Sallie Mae) has done business which is on a very profit oriented basis. Its profit motive seem to have taken precedence over its public purpose...
Longenecher says that in Minnesota and other states local banks are much less reluctant to take loans than Sallie Mae...
...found that we could get a better deal from banks here in the Twin Cities area and they will provide us with better secondary market activities. We found we could get a better deal from the banks than from Sallie Mae and the reason for this and this is kind of perverse is that their profit requirements were fairly lower than Sallie Mae...
...adds that Sallie Mae has been "tremendously risk averse in a business that is built on risk. They were quite willing to purchase the high balance loans, on which they made a lot of money but they were very uninterested in being involved in any of the low balance loans, which were unlikely to make any profit for them and the ones which were most likely to go into default...
...students hurt most by Sallie Mae's reluctance to buy the small loans are those in small loans are those in small colleges and vocational schools, where tuition and thus the size and profitability of small loans are relatively lower. Banks are unwilling to make these loans both because of the low profit margin and because Sallie Mae will be reluctant to buy it or will only pay less than face value for the debt...