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Its hopes are tied to new system for delivering loans on line, but some question its ability to win over more colleges
RESTON, VA.
ON THE ROPES in recent months, Sallie Mae is flexing its muscles. Its target: the U. S. Department of Education's Direct Student Loan Program.
Officials at Sallie Mae, the largest financier of student loans in the country, believe that they can steal colleges away from the direct-loan program with a new product: an on-line loan-delivery system in which students could apply and gain approval for loans over the Internet, and college officials could process and monitor the loans with the same technology.
Sallie Mae officials say their new Laureate system will make the delivery of loans to students as quick and as easy in the guaranteed-loan program as it is in direct lending. But they say Laureate will require less work from aid administrators, while providing generous benefits to students and superior services to colleges. Over the next several months, the company plans to market Laureate to 800 colleges, 450 of which are in the direct-loan program. Sallie Mae wants institutions to be able to start using Laureate to disburse loans next fall.
"We are raising the stakes," says Paul Carey, Sallie Mae's executive vice-president. "We want to show direct-lending schools that there is a new product available in the guaranteed-loan program that is a lot better than what they have now."
FIERCE COMPETITION
Sallie Mae is one of several players in the guaranteed-student-loan program that are fiercely competing to increase their market share by creating Internet-based loan systems that would ease the delivery of loans to students. Those companies believe that direct lending is vulnerable because the Education Department has moved slowly to take advantage of Web technology for loan delivery.
The companies view the World-Wide Web as the key to simplifying the guaranteed-loan program, which often frustrates colleges because loans are frequently delayed as a result of the varied participants and processing delays involved. Using the Web, Sallie Mae and others could communicate with students and colleges quickly, speeding up the delivery of loan funds to campuses and providing a single source of information to help officials better manage student-loan accounts.
Each of those companies is hoping to...