Sector Snap: Student lenders rise on loan-limit bill passage

As credit markets have tightened, many private lenders have stopped making loans in the federal program, leaving students and parents with fewer options to finance higher-education costs. The legislation increases limits on how much borrowers can receive in federally subsidized student loans, which could benefit companies such Reston, Va.-based SLM Corp., better known as Sallie Mae, that remain active in the program.

The House passed the bill Thursday in a 388-21 vote, one day after the Senate's approval. President Bush is expected to sign the measure.

SLM shares rose $1.32, or 6.6 percent, to $21.30 in midday trading.

"Passage of the Miller/Kennedy bill is a near term positive for (Federal Family Education Loan Program) lenders, as it empowers the (Department of Education) to buy federal student loans for a year," Citi Investment Research analyst Bradley Ball wrote in a note to investors.

Also, calls for the Federal Financing Bank, a subsidiary of the Treasury Department, to intervene by buying up student loans may still be on the table, Ball wrote.

"The FFB proposal is not dead, as it is seen by some in Congress as a necessary back-up plan in case the DOE falls short," he said.

Other student lenders also advanced. Student Loan Corp. rose $2.94, or 2.2 percent, to $135.64; First Marblehead Corp. rose 22 cents, or 5.8 percent, to $4.02; and Nelnet Inc. climbed 62 cents, or 4.6 percent, to $14.03.