SLA Student Loan Index Drops to 25.6 in Volatile November

The SLA Student Loan Index of five publicly traded student loan companies (Sallie Mae, Student Loan Corporation, Nelnet, First Marblehead and My Rich Uncle) dropped further in November to 25.6, from 27.9 in October.  As a quick reminder, this index was launched in early July 2008 to provide a barometer of investor sentiment about the industry. 

Actions taken by the Department of Education in November point to the dire straits the industry currently finds itself:

• On November 8th, the Department of Education set up a plan to provide liquidity support to help lenders sell their pre-May 2008 FFELP loans.
•  On November 20th, the Department of Education announced a plan to provide immediate capital to lenders for their 2007-08 FFELP collateral.
  

The fact that these two new programs in tandem with the Treasury’s TALF program couldn’t entirely lift the industry out of their doldrums indicate the extreme bearishness regarding the sector and financials in general.  XLF, an index made up of financial service companies, fell 18.5% for the month. 

The Student Loan Index had fallen as low as 16.5 on November 20^th but rebounded sharply after the Treasury announced their plan to assist student lenders through their TALF (Troubled Asset Lending Facility) program. 

 Among individual companies:

• My Rich Uncle had the sharpest drop of 54.5%, however as a penny stock it is subject to extreme swings in volatility.  MRU closed the month at $0.05/share.  In November, they continued their hunt for $250 milllion in capital.  On the positive side, they were able to negotiate extensions to their credit agreements until January, thereby forestalling default.

• First Marblehead saw their stock price drop 18.2% for the month.  FMD announced a 24% cutback in their workforce earlier in the month.

• Student Loan Corporation was the one bright spot in the sector, with their share price rising 8.5%, in contrast to their parent company, Citigroup, which lost 39.3% of value in the month and required a government rescue in late November.  Student Loan Corporation paid their quarterly dividend of $1.43/share in November, which gives them a hefty dividend yield over 15%. 

Here is how each of the companies have performed over various time horizons.  Note that Nelnet is the only company whose stock price has risen on a YTD basis:

	FMD	MRU	NNI	SLM	STU
November '08	-18.2%	-54.5%	-10.0%	-13.7%	8.5%
3 Months	-66.3%	-95.0%	-16.3%	-44.2%	-66.4%
YTD	-90.9%	-98.6%	4.2%	-54.3%	-62.6%
1 Year	-95.3%	-98.7%	-3.9%	-75.8%	-70.7%
3 Year	-93.6%	-98.6%	-64.7%	-82.0%	-79.4%