Sallie Mae Posts Surprise Profit Jump

SLM(SLM Quote), known more fondly -- or not so fondly, depending upon your student-loan debt -- as Sallie Mae, proved today that it might be a dark horse in the recession race.

While investors had all but counted out the student loan provider, the company managed to post a 9% jump in second-quarter earnings.

During the quarter, the company earned $170 million, or 31 cents a share, compared with $156 million, or 27 cents, in the year-ago period.

Those results included a $325 million gain on debt repurchases, a $362 million provision for private credit losses and a $105 million reduction of net interest income caused by commercial paper market dislocation.

Sallie Mae also managed to significantly increase its liquidity during the quarter.

With the conclusion of the 2008-2009 academic lending season, Sallie Mae originated nearly $20 billion in federal student loans, an increase over the 2007-2008 academic year's $18 billion.

Earlier in the month, Jim Cramer said not to rule out Sallie Mae after the company won an important contract from the government to service existing student loans and future loans.