Sallie Mae has closed its deal to buy $27 billion of securitized federal student loans and related assets from Student Loan Corp. (SLC), which is majority-owned by Citibank.
The deal has added 1.3 million customers to the student loan firm's customer base.
“We are pleased to welcome our new customers and to bring them our first-class customer care, college saving, and online banking offerings to help them achieve their education and financial goals,” said Albert L. Lord, vice chairman and CEO of Sallie Mae, which is the only U.S. financial services firm that specializes in education.
The sale of the assets was originally announced back in September. Also in September, Discover Financial Services also said that it was buying SLC for $600 million in a deal that beefed up the credit card issuer's growing student loan business. As part of the deal, Discover bought $4.2 billion of private student loans at an 8.5% discount and $3.4 billion of the company's securitizations.
Bank of America Merrill Lynch analysts said at the time of these announcements that the sale of SLC to Discover and certain FFELP assets to Sallie Mae should have a minimal impact on the student loans ABS sponsored by SLC.
The analysts cited the fact that Sallie Mae has extensive experience servicing FFELP student loans and that Citibank will still be servicing SLC's existing private student loans.
However, the private student loan ABS that are sponsored by SLC might become vulnerable over time to changes in Citibank's student loan servicing platform, BofA Merrill analysts wrote.
Sallie Mae now manages or services over $200 billion in federal student loans and $36 billion in private student loans. It is the biggest provider of private student loans. Sallie Mae’s Smart Option Student Loan is the private education loan elected by the National Education Association Member Benefits Corp. and 250 banks and credit unions.