Sallie Mae (SLM) and Nelnet (NNI) Set to Open Higher On DoE Student Loan Servicing Contracts

June 18, 2009 9:07 AM EDT

SLM Corp. (NYSE: SLM) and Nelnet Inc. (NYSE: NNI) are indicated to open much higher today after the companies, along with two others, received Department of Education student loan servicing contracts. The news alleviated some concerns about the companies role with the new administration.

Importantly the contracts are for servicing of federal student loans owned by the Department of Education and does not include loan origination and other services.

Analysts at KBW, said if Sallie Mae were to receive 25% of the servicing volume it would generate roughly $0.30 in EPS on an annual basis after four years. For Nelnet, if the company were to receive 25% of the servicing volume, it could potentially generate $1.35-$1.40 in EPS on an annual basis after 4 years.

KBW said ultimately the full impact of the servicing contract will depend on a number of factors including whether or not the FFELP will be eliminated.

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