Reston, Va.-based Sallie Mae, the largest U.S. student loan provider, said it is reviewing its business with J.P. Morgan Chase & Co. (JPM), which on Thursday completed a $58.1 billion purchase of Bank One.
In Bank One's and Sallie Mae's marketing agreement, Sallie Mae had a specific sales force, known as Education One Group, representing Bank One student loan products on campus.
Sallie Mae said it is contesting Bank One's right to terminate the agreement and "in-source" the marketing. Bank One contends that its July 1 merger with J.P. Morgan Chase entitles it to do so, Sallie Mae said.
Bank One's termination of the agreement and "in-sourcing" of the marketing would transfer Sallie Mae employees -- totaling about 64 people -- and infrastructure to Bank One. This move is what is being contested by Sallie Mae.
Sallie Mae, which manages over $92 billion in student loans for more than 7 million borrowers, said its near- and long-term outlook for loan origination growth remains unchanged.
"This will not be material to 2004 earnings," Tom Joyce, a spokesman for Sallie Mae, told Reuters.
Sallie Mae, JP Morgan Chase and Bank One all offer student loans. A Sallie Mae sales force provides Bank One student loan products on college campuses because the schools often want student financing from different lenders.
Sallie Mae typically then buys the loans from banks and usually services them -- that is, makes sure borrowers make timely payments of principal and interest.
Some of these loans are then resold as bonds on Wall Street with the help of banks like Bank One and JP Morgan to such investors as mutual funds. Proceeds of the sales help Sallie Mae keep lending and buying student loans.
Sallie Mae shares fell 64 cents to $39.68.