Student loans are a huge and surprisingly profitable business. Just ask the folks at the Student Loan Marketing Association nick named "Sallie Mae," which owns the debt of about one third of all educated people paying back college loans.

Chartered by the federal government in 1973 but operated as a private firm. Sallie Mae encourages banks and universities to make student loans by guaranteeing their security. Its most common tactic includes purchasing loans originally made to students from the banks themselves under the assumption that banks will lend more easily if a safety net exists to buffer the very risky and unprofitable market.

Sallie Mae appears like a very altruistic fall guy for a good cause assuring that college students can get money for school. But with very conservative management practices and a corps of young highly aggressive officers. Sallie Mae last year made $66 million in profits while managing $6.7 billion worth of student debt, a 79 percent jump over 1982 itself a remarkable year with profits skyrocketing 109 percent over 1981 levels. But these profit motives have driven up the cost of student loans officials admit dampening the original goals of the agency.

What the Washington, D.C. based company does is hardly remarkable in itself. Sallie Mae is a "secondary market" for student loans a bank for banks that lend to students. Like any other bank it makes profits by charging borrowers more than what it costs to lend to them all with the government's blessing.

Success

The company now publicly owned was started in conjunction with most of the nation's prominent universities. Sallie Mae's fabulous financial success transformed an initial $400,000 investment by Harvard in 1974 into a whopping $14 million by the end of 1983. Other colleges have reaped similar if not as spectacular sums.

Harvard currently ranks as the fifth largest stockholder of the company behind Citibank Chase Manhattan, the First National Bank of Chicago and Brown University.

The union of profits and public service makes Sallie Mae "a very interesting success story and one Harvard can be very proud of ," says College Treasurer George Putnam '49, one of the company's founders.

Mechanics

Sallie Mae also runs a "warehousing advance program," under which financial or educational institutions looking for cash advances to maintain or increase their student loan programs pledge their loan portfolios or government securities to Sallie Mae as collateral.

Also its "commitment program" has proved very useful to colleges participating in government sponsored loan programs because they can sell bad loans to Sallie Mae and avoid getting burned by delinquent alumni.

Family

Sallie Mae is just one of several government created private organizations with women's names all designed to serve a public purpose while making money at the same time. Three of the most important Fannic Mae (Federal National Mortgage Association). Ginnie Mac (Government National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) all serve as reservoirs for home mortgage loans.

While Sallie Mae has grown to be the predominant secondary market for student loans many higher education sources say the company has become preoccupied with turning profits. David Longenecher of the Minnesota Higher Education Coordinating Board a $100 million "last resort lender" to students who can't get loans anywhere else says. "We're kind of critical of the way in which (Sallie Mae) has done business which is on a very profit oriented basis. Its profit motive seem to have taken precedence over its public purpose."

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