Sallie Mae, the largest U.S. student-loan company, has agreed to a $25-billion buyout involving a pair of private-investment funds, JPMorgan Chase and Bank of America. In the past several weeks, the entire student-loan industry has been under fire for improper relationships with college financial-aid offices.
The private equity firms, J.C. Flowers & Co. and Friedman Fleischer & Lowe, will own more than 50 percent of the company.
Sallie Mae, formally known as the SLM Corp., was started as a quasi-governmental company, but it was privatized in the late 1990s. Today, Sallie Mae originates about 23 percent of all student loans, making it the biggest such company in the country.
But the company has been embroiled in the current student loan controversy, which involves at least six lenders and more than 100 colleges and universities. Among the allegations was that student loan companies tried to influence aid officials at colleges by paying them to sit on advisory committees.
Colleges also allowed employees of loan companies to answer the phones at financial aid call centers — something critics called a blatant conflict of interest. Last week, Sallie Mae reached an agreement with New York Attorney General Andrew Cuomo agreeing to pay $2 million to settle the charges. It also said it would adhere to a code of conduct.
While Sallie Mae didn't admit to any wrongdoing, it promised not to engage in any questionable practices, such as providing gifts to university officials.