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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

The Discreet Charms of Sallie Mae by Jim McTague

Summary: Democrats have long been trying to weaken the Federal Family Education Loan Program [FFELP], reducing substantial Federal backing of student loans for private lenders. Clinton-era Congressman even tried and failed to get the Dept. of Education to offer loans directly. Sallie Mae (NASDAQ:SLM) (the biggest student lender) shares have gone from June's $54 To $41 on 1) The Democrats congressional majority win. 2) Bush's February budget announcement of interest rate caps on student loans. 3) Recent scandals like other lenders giving stock options and gifts to university officials in exchange for favoritism, and Congressional/SEC investigations of CEO Albert Lord's sale of 400K shares just days before Bush's announcement. But SLM shares could gain back 10%: 1) Lord still owns 785,994 shares, worth $32 million. 2) Students still need college loans. 3) SLM is expected to earn $0.80/share this quarter, and $3.25 all year, yet it trades at 13 P/E to its former 19 P/E. 4) Democrats congressional majority is slight, lowering the prospect of extensive cuts in federal student loan guarantees. 5) SLM will likely lessen its dependency on Federally-backed loans. Barron's Bottom Line: Good quarterly reports could send the stock to 15 P/E, or over $48.

Related Links: Bloomberg Three Year Dividend Growth ProjectionsSallie Mae: How Bad The Impact From the President's Budget?Sallie Mae's Hard Lesson: Washington Giveth, Washington Taketh Away

SLM 1-yr. chart:
SLM Investment

Source: Sallie Mae Looks Oversold - Barron's