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Sallie Mae CEO Albert Lord Rejects Education Loan Bubble Claims

Albert Lord, chief executive officer of student lender SLM Corp. (SLM), challenged claims that education debt is ballooning to dangerous levels.

“We don’t see anything of any evidence close to a bubble,” Lord said today on a conference call with analysts. “This country underwent a significant financial crisis in our very recent past. It’s not really a surprise that many see bubbles around every corner.”

Lord’s comments address concerns that U.S. households could buckle under the burden of growing student loan bills, with educational debt at $1 trillion, according to the Consumer Financial Protection Bureau. Tuition expense has risen about three times as fast as wages since 2001 before accounting for inflation, according to data from the Labor Department.

Many former students won’t be able to obtain mortgages at affordable rates because of their debt burdens, according to a report this week from Brockhouse & Cooper Inc. Interest payments on student debt amount to $1,165 a year, based on an average balance of $23,300 in last year’s third quarter and a 5 percent interest rate, according to the report from strategist Pierre Lapointe.

SLM, known as Sallie Mae, boosted its originations of non- government-guaranteed education loans to $1.2 billion in the first quarter, up from $940 million in the year-ago period, according to a statement yesterday. The Newark, Delaware-based company is forecasting $3.2 billion of originations in 2012.

While rejecting claims that a bubble is forming in the student-loan market, Lord said that the $200 billion in new loans taken out during the past two years was surprising.

“I confess to being a bit wide-eyed myself at the $200 billion number,” he said.

Less than $20 billion of that debt was private, or non- government guaranteed, he said. Sallie Mae is increasing private loan originations after legislation passed in 2010 cut companies out of the market for government-backed lending.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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