Sallie Mae perhaps is the biggest winner in the Direct Loan servicing contract sweepstakes.  Yesterday, the company’s stock surged on the news that analysts believe the company’s share price is undervalued.  Some analysts believe the discount to be as deep as 50%.  Recall several weeks ago we reported several prominent analysts believed the stock to be the “stock of the year” in terms of value.  Why is this important?  It is important that the experienced and publically traded student loan companies remain viable in this new marketplace.&nbsp

After a rather long and arduous process, The Department of Education announced the “winners” of the Direct Loan Servicing contracts.   The four companies selected are selected were AES/PHEAA of Pennsylvania; Great Lakes Education Loan Services, Inc., of Wisconsin; Nelnet, Inc., of Nebraska; and Sallie Mae Corporation of Virginia.  The Department announced that these companies will service a portion of the approximately $550 billion outstanding federal student loan portfolio.

While many investors and most analysts are steering clear of student loan stocks, CNBC’s “Mad Money” Show Host Jim Cramer says that Sallie Mae (NYSE: SLM) will continue to make student loans and he advises you to invest money into the company.  On his show Friday, he called Sallie Mae the “speculative stock of the year.”   Trading just north of $6 a share, there is little doubt that the ongoing plan of the Obama administration to eliminate FFELP subsidies has hurt the SLAM stock.  Cramer indicated with a 3x earnings ratio and a likely liquid

The debate rages over the viability of the FFELP vs. the Direct Lending Program.  Which one costs taxpayers more is seemingly at the heart of the debate.  FFELP Proponents had to cringe when an audit of the Kentucky Higher Education Student Loan Corporation found that the company might have to repay over $9 million to the U.S. Department of Education.

Recently we reported that the Connecticut Student Loan Foundation faced tough questions in light of state audits questioning its expenditures such as excessive bonuses and golf club memberships.  CSLF also faced difficult economic times and many believe the organization will be out of money by the end of the calendar year.  The Foundation has not been aided by discussion of ending the federally subsidized student loan program. 

Friday, Governor David Patterson and the New York State Higher Education Services Corporation’s (HESC) launched a new website to assist students and families in the financial aid process. 

Congress continues to mull the budget proposal of the Obama Administration and occasionally support and opposition is found in strange places.