SLM CEO: Dept Of Education CP Facility Could Start In 10 Days

A federal program, key to SLM Corp.'s (SLM) funding plan, is slated to kick off within the next 10 days, said Chief Executive Albert Lord.

The U.S. Department of Education's asset-backed commercial paper facility would allow the student loan company to fund as much as $16 billion of federal student loans, said Lord, during a conference call Thursday to discuss SLM's first-quarter results.

Commonly known as Sallie Mae, the shares of the largest U.S. student-loan company recently traded at $4.90, up 6.5%, in premarket trading. The stock has lost 48% of its value so far this year.

Sallie Mae makes private and federal student loans. The company reported a first-quarter net loss of $21.1 million, or 10 cents a share, compared with a year-earlier loss of $103.8 million, or 28 cents.

The latest results included $203 million for private education loan losses and charge-offs of $139 million of private education loans during the quarter.

Analysts polled by Thomson Reuters expected per-share earnings of 12 cents.

Total interest income dropped 34% to $1.24 billion amid a discrepancy in borrowing rates in the commercial paper market and a key short-term interest rate benchmark.

Sallie Mae originated $6.6 billion in loans, up 10% from a year ago. Private education loans dropped 40% to $1.5 billion, due to tightening of underwriting standards and the elimination of non-traditional private loan originations.

The company increased its loan-loss provision by 82% to $250.3 million.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; [e-mail]

(John Kell contributed to this report.)