Sallie Mae Makes a Surprising Comeback

The student loan company SLM (SLM), better known as Sallie Mae, has taken a thrashing in recent years. In 2007, Sallie Mae's stock fell from $58 to $19.65 a share in the wake of a failed buyout attempt led by private equity firm J.C. Flowers. Shares sank as low as $3.19 in March 2009 amid the financial crisis, which froze the debt markets it relies on for funding. Last year, Congress passed legislation that knocked private lenders out of the business of making government-backed student loans, which had accounted for 80 percent of Sallie Mae's lending.

Such blows would seem to add up to a dreary outlook for Sallie Mae and its chief executive officer and vice-chairman, Albert L. Lord. Yet investors are wagering the company will prosper on a combination of old loans and private lending. Sallie Mae's shares have jumped 29 percent in 2011, closing at $16.22 on May 16, compared with a 5.7 percent gain for the Standard & Poor's 500-stock index. On Apr. 21 the company raised its earnings estimates for the year and declared its first dividend since 2007.