Congress is reportedly close to an agreement that would cut subsidies to the student loan industry, a move that could kill the planned buyout of SLM Corp., or Sallie Mae, the nation's leading provider of student loans. According to reports, Congress is looking to cut a subsidy paid to student lenders a bit more than expected, and lower the amount the government reimburses lenders for missed payments. It also would temporarily cut borrower interest rates on the loans and launch a pilot program to test the auction to lenders of student loans taken out by parents. J.C. Flowers, which is part of an investor group that includes Bank of America Corp. and JP Morgan Chase & Co., has indicated that legislative proposals such as 
this "could result in a failure of the conditions" to the closing of its planned $25B purchase of Sallie Mae. Shares of Sallie Mae dropped 1.6% to $49.10 Wednesday as rumors of the deal circulated and investors feared Flowers would use the legislation to back out of the buyout. Sallie Mae, however, claims that the changes would hurt profit by less than 10% and, therefore, are not material enough to cancel the deal.
Sources: AP, Dow Jones Newswires
Commentary: Sallie Mae Buyout May Fail Due to Pending Legislation • Sallie Mae Merger-Arb: There's No Such Thing as a Free Lunch
Stocks/ETFs to watch: SLM, JPM, BAC, XLF, PGF, IYF
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