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Sallie Mae Divests Campus Solutions

Zacks Equity Research

SLM Corporation (SLM), also known as Sallie Mae, announced the sale of its Campus Solutions business to Higher One Holdings, Inc. (ONE). The all-cash deal is valued at approximately $47.25 million.

Sallie Mae’s Campus Solutions unit provides business-to-business services, which comprise e-Commerce and billing payment services, refund disbursement services, and tuition payment plan management to country-wide business offices of colleges and universities.

Founded in 2000, Higher One is a chief financial services provider to colleges and universities. Further, it offers data analytics solutions. With its diverse range of services, Higher One specializes in enhancing administrative efficiencies and reducing fraud, and helps lower the expenses of higher education.

For Higher One, the acquisition of Sallie Mae’s Campus Solutions will be beneficial because the latter has a trusted client-base in institutions across the country. Additionally, the Campus Solutions unit has a proven track record and years of expertise in financial assistance and payment solutions. The Campus Solutions portfolio will be a value addition to the wide range of products and services of Higher One. With the completion of the agreement, Higher One expects to continue offering its customers the refund disbursement services, payment processing services and data analytics solutions of the highest quality.

Sallie Mae’s sale of the Campus Solutions segment reflects the company’s efforts to bolster its revenues by focusing on its consumer segment consisting of retail products and services that directly help students and families plan and reduce costs of higher education.

The suspension of the new federal student loan origination, in compliance with the legislation passed by both the House and the Senate in 2012, will continue be a revenue headwind for Sallie Mae. However, we believe that the company’s efforts to support its earnings by the expansion of its private education loan business and reduction of its loan loss provision expenses are encouraging.

Despite challenges, Sallie Mae’s leading position in the student lending market, diversifying efforts and increasing private student loan originations will help the company navigate the sluggish macroeconomic environment.

Sallie Mae currently carries a Zacks Rank #3 (Hold). Financial stocks that are performing better than Sallie Mae include Preferred Bank (PFBC) and CU Bancorp (CUNB), both of which carry a Zacks Rank #1 (Strong Buy).

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