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.   They have the experience to create product for students, the online tools to educate an ever-increasingly complex financial aid marketplace and the default data to assist in financing loans upon a thawing of the credit markets.  

Sallie Mae’s transformation from federal loan originator to federal loan servicer marks a drastic change in strategy.  The company was one of four the Department of Education awarded servicing to service federal student loans. Shares of the company rose more than 10 percent yesterday to close at $9.20.  Nowhere near the near $23 high of a year ago but well north of the $3 per share earlier this year.