April 11, 2008

To Our Valued School Customers:

Sallie Mae has provided saving- and paying-for-college solutions to help 21 million students grow into their dreams. Today, the federal student loan marketplace is experiencing unprecedented change and uncertainty. Significant legislative cuts and severe credit market deterioration have caused one-third of the top 100 student loan originators to exit the student loan program, displacing more than 16 percent of Federal Family Education Loan Program (FFELP) loan originations. As a result, loan demand will significantly exceed lender supply for the upcoming academic year.

Sallie Mae remains committed to helping students plan, save and pay for college. As the market leader, we feel strongly that we must take the following steps to direct our resources to maximize college access for students and families:

• Effective today, April 11, 2008, we are suspending participation in the federal consolidation loan program so that we may direct more of our resources to students entering school. Federal loan consolidation generates a negative return and, therefore, is no longer economically viable for any FFELP lender. We will make our student loan customers aware of their repayment options, including Federal Direct Loan consolidation.
• For all loans guaranteed after May 2, 2008, we will concentrate our resources totally on college access. We will discontinue paying, on behalf of students, the federally mandated Stafford loan origination fee. With the large number of lenders exiting the program, Sallie Mae cannot justify subsidizing some students at the expense of others who may be unable to get funds for college.

These steps focus on providing students with continued access to federal and private student loans.

FFELP lenders’ ability to meet demand, however, will be a function of renewed access to the long-term loan securitization markets. Until then, other actions are needed to ensure that the displaced loan volume created by FFELP lender exits can be absorbed by those remaining. Therefore, we and others are actively presenting solutions to the Departments of Education and Treasury, the Administration and Congress that would stabilize FFELP and ensure uninterrupted student funding access. We encourage you to reach out to this group, as well. Time is running out on the opportunity to act to prevent student and school disruption this upcoming academic year. We remain committed to finding the right solutions for FFELP, the nation’s oldest and largest financial aid program that, since 1965, has provided $750 billion to help millions of students achieve the dream of a college degree. More importantly, by leveraging private sector competition and ingenuity, the FFELP guarantees consumer choice, increases college awareness and produces millions of individual success stories.

No other company offers the range of saving, paying and financing solutions that we do: from our Upromise rewards and 529 college savings plans, to our tuition payment plans, student financial literacy programs and access philanthropy, we guide families to the saving- and paying-for-college options that are right for them.

Thank you for the opportunity to be of service to you and your students.

C.E. Andrews
President

Barry Feierstein
Executive Vice President