Student Loan Collapse Becomes Analysts' Favorite Financial Play: Street Whispers

NEW YORK (TheStreet) -- Sallie Mae (SLM)'s 23% year to date gains are just a warm up, if Wall Street analysts are to be believed.

The student lender is the favorite financial sector stock of Wall Street analysts among the 85 in the S&P 500, according to Bloomberg data.

Ten analysts follow the company, and they all have "Buy" ratings, according to Bloomberg. If you look at the numbers, it's not hard to see why. The company's credit metrics are improving and it is buying back shares at a steady clip.

Speaking at the Barclays Financial Services conference last week, CEO Al Lord made the case that the government, Sallie Mae's principal competitor, is reducing its influence in the student loan market. As for private competitors in the banking industry, they come and go, Lord says. Student lending is "never at the top of their list and it's always at the top of ours."

However, government involvement in student lending is unlikely to decrease, and could increase, according to a lobbyist who did not want to go on the record because Sallie Mae is a client. The 2010 Health Care and Education Reconciliation Act eliminated government subsidies to private student loans, potentially creating a bigger role for the government.

"When the government gets ahold of a new program its role tends to get bigger, not smaller," the lobbyist says.

Add to that the fact that the crushing burden of student debt has gotten increasing attention in the press, another factor likely to increase government involvement in the industry, and some of the rosy projections made by Sallie Mae and the analysts that cover it start to become a bit less convincing. With all those analysts behind the stock, you have to wonder what can drive it higher at this point.

-- Written by Dan Freed in New York.

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