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HRD-93-6R 1 (1992-12-01)

handle is hein.gao/gaobackel0001 and id is 1 raw text is: GAD General Accounting Office Washington, D.C. 20548 Human Resources Division B-251401 I~~~~~~ I IUlllll Ulllllll I DItl December 1, 1992 The Honorable Terry Sanford 148091 United States Senate Dear Senator Sanford: In a recent letter, you asked that we respond to several issues that one of your constituents raised about certain activities of the Student Loan Marketing Association (Sallie Mae). Sallie Mae is a federally charted corporation that buys and holds guaranteed student loans. Sallie Mae's buying and holding of loans provides lenders that make loans an opportunity to sell them. Lenders then have additional capital to make more loans. This process ensures eligible students access to these loans. Your constituent raised the question of whether Sallie Mae is exceeding its statutory authority in conducting these activities. Specifically, the concerns centered on the nature of Sallie Mae's participation in the CollegeCredit program. CollegeCredit is sponsored by the College Board, the Teachers Insurance Annuity Association-College Retirement Equities Fund (TIAA-CREF), and Sallie Mae. Through postsecondary institutions, CollegeCredit makes financial aid--mostly guaranteed student loans--available to eligible borrowers. A primary issue is whether Sallie Mae is functioning as an originating lender--actually disbursing funds to borrowers--or is limiting its activities to buying and servicing loans as a secondary lender.' Other issues raised in the constituent's letter included assessing current and future competition in guaranteed student loan programs, analyzing Sallie Mae's cost of funds, and identifying policy issues related to the above. 'Loan servicing generally includes accounting for loans, collecting principal and interest payments, and following up with borrowers whose loans are delinquent or in default. Servicing arrangements depend on contractual terms between Sallie Mae and each lender. GAO/HRD-93-6R Sallie Mae Activities 5&1 CIOcf

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