Pa. board rejects Sallie Mae bid

Despite an outright rejection of its offer to manage Pennsylvania's student loan program, education funding giant Sallie Mae will continue to pursue its proposal.

The board of the Pennsylvania Higher Education Assistance Agency unanimously rejected Sallie Mae's $1 billion bid last Monday and passed a resolution never to sell PHEAA to a for-profit organization.

Calling the offer "a get-rich-quick scheme," PHEAA spokesman Keith New said the offer would ultimately hurt students and families in Pennsylvania.

"We operate as a non-profit ... and pay dividends to the students," New said. "Sallie Mae pays dividends to their shareholders."

In the proposal, Sallie Mae offered to pay an initial $500 million to the state and $100 million a year for five years to control PHEAA.

In addition, Sallie Mae said it would keep the in-state employment level the same and leave the PHEAA board intact.

Although the board resolutely turned down the proposal, Sallie Mae intends to go through the state legislature to pursue the PHEAA takeover. As a state-born program, PHEAA's board is accountable to the state legislature.

"We are not going to withdraw the offer, but [we will] seek a fairer hearing," Sallie Mae Vice President of Corporate Communications Tom Joyce said.

"We are disappointed they rejected the offer out of hand. We have an offer that is a real win for Penn students and tax payers," Joyce continued, adding that the students in Pennsylvania will save more through Sallie Mae.

Despite Sallie Mae's confidence that it will prevail, others see the takeover as unlikely.

"I do not think it will be successful," said State Rep. James Roebuck (D-Phila.).

Roebuck, a member of the 20-person PHEAA board that rejected Sallie Mae's proposal, defended the board's decision.

"The view of the board is that there is no desire to actually sell the operation. The operation is successful and provides substantial benefits to students in Pennsylvania and there was nothing in the proposal that offered anything more beneficial to those students we serve."

Despite those assurances, student loan groups and college financial service organizations are watching both companies closely.

Calling the offer "a startling development," Penn's Associate Vice President for Finance Frank Claus said he is following the story intently.

"It is a bizarre situation," Claus said. "PHEAA is a leading guarantee agency and for Sallie Mae to come in and say we are going to buy it is a pretty dramatic overture."

Whatever happens, Claus said Penn will protect the interests of the students.

"Our number one concern is preserving what PHEAA has done for our students," he said, "but all bets are off if it looks like it is going to affect the quality of service for our students in any way."

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