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Student loan firm reported in sale talks

NEW YORK --Sallie Mae, the nation's largest lender to college students, is in talks to be bought out by private equity in what could be a deal for more than $20 billion, people briefed on the discussions said yesterday.

A buyout, if completed, would be an impressive show of muscle-flexing by private equity firms, which have grown emboldened over the last two years by acquiring ever larger targets.

Yet the talks are taking place as the firm has come under scrutiny by state and federal officials over the financial relationships between college officials and student loan companies. This week, Sallie Mae agreed to pay $2 million and to change its business practices to settle an investigation by the New York attorney general's office.

One potential bidder is the Blackstone Group, the people briefed on the discussions said. Blackstone declined to comment. It could not be learned who the other potential bidders were, but one buyout group was thought to include a financial services firm.

The negotiations appear to be at a late stage, but these people warned that numerous hurdles remain, and it was unclear that a deal would be reached.

Sallie Mae, officially the SLM Corp., was created by Congress in 1972 to support a secondary market for student loans issued by private lenders, much the way Fannie Mae and Freddie Mac support the housing market. It was privatized in the 1990s, becoming fully independent as a publicly traded company by 2004. Now institutional investors like the Vanguard Group, not the government, own the company.