Implications of the privatization of sallie mae

In 1997, Congress enacted legislation to transition the Student Loan Marketing Association (Sallie Mae) from status as a government-sponsored enterprise (GSE) to a fully-private, non-federally chartered organization. The process through which this legislation was enacted will have precedential value for future legislation affecting other GSEs.

This article reviews the unique context in which the Sallie Mae Privatization Act was considered and enacted. Sallie Mae was an active participant in the development of the privatization legislation, and Congress had little precedent in considering the diverse interests of stakeholders such as other entities involved in student loans, taxpayers, and Sallie Mae shareholders. Full assessment of the 1997 legislation requires a review of how the “privatizing” of Sallie Mae changes the student loan marketplace.