The federal government established the Student Loan Marketing Association (SLMA) in 1972 to allow more people the ability to go to college. SLMA, also known as Sallie Mae, is the largest student loan provider in the country by far, and manages $126.9 billion in loans for more than nine million borrowers.
Contrary to popular belief, obtaining a loan through Sallie Mae is not borrowing money from the federal government. In reality, Sallie Mae is a for-profit corporation. Its stock trades on the New York Stock Exchange (ticker SLM), and its loans are sold to investors. Investors agree to purchase what would otherwise be “risky” loans, because the federal government guarantees the repayment of student loans. After all, high school seniors are not the world's greatest credit gamble.
Very few financial investments are guaranteed, but it is important to understand that SLMA debt securities are exactly that. Except in extremely rare cases, federal student loans cannot be discharged in bankruptcy. Even if you file bankruptcy, you still will be obligated to repay your student loans.
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