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Sallie Mae Could Make Out Nicely

Inside Wall Street


Once the giant in campus lending, Student Loan Marketing Assn. has learned a stark lesson: The government giveth--and then taketh away. Popularly known as Sallie Mae, the company was the largest holder of federally guaranteed student loans--until the government announced last year that starting in July, 1994, it would make 60% of such loans directly. Since then, Sallie Mae's stock has headed south, losing about half its value--from 70 in 1993 to 34 lately. Predictably, most analysts are down on Sallie Mae.

But some contrarians, including money manager Robert Torray and Capital Research & Management, have upped their stakes: They expect Sallie Mae to become an even bigger factor in the business--whether or not Uncle Sam is any good as a lender.

"The government's entry will spark a massive consolidation, and there will be fewer players around," says one money manager. So Sallie Mae will still be "the dependable industry mainstay."

Analyst Leslie Nelkin of Furman Selz agrees. "Even if government lending succeeds, a likely surge in demand will create enough business for Sallie Mae," he says, noting that loan originations should rise by 20% to 25% this year, thanks to a new rule raising loan limits and expanding availability.

Even under conservative assumptions, says Nelkin, Sallie Mae's net could grow to $5 a share in 1994 and $6 in 1995, up from $4.83 in 1993. Nelkin sees the stock rebounding to 55 in a year.GENE G. MARCIAL

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