Standard & Poor's has placed its ratings on SLM Corp. on CreditWatch Negative, the rating agency said today.
SLM’s 'BBB-'/'Negative'/'A-3' rating is now on CreditWatch Negative since SLM may no longer be able to originate federal student loans by July 2010.
The U.S. House of Representatives Education and Labor Committee has voted to pass a bill that would eliminate the origination of Federal Family Education Loan Program (FFELP) loans by private lenders after next July.
However, as S&P noted, the bill must still be passed by the full House and Senate, and be signed off by the President despite the current attention on and pressure for modifications.
SLM's business profile risk will most likely change with legislation regardless of the legislative outcome, S&P said, as it is in the process of determining SLM's likely future business model.
This determination takes into account: assessment of SLM's future credit risk, capital needs, funding and income generation ability as an originator of private student loans; the runoff timeframe and economics of the company's current FFELP portfolio combined with an overall analysis of its debt service capabilities; and, SLM’s relationship with the government.
